The Mariana Environmental Disaster and its Labor Market Effects

TL;DR

This study investigates how the 2015 Mariana Dam environmental disaster in Brazil affected local labor markets, highlighting the primary role of production factors and spatial dynamics through empirical analysis.

Contribution

It compares two theoretical models of environmental impact on labor markets and provides empirical evidence favoring the factor of production channel with spatial effects.

Findings

Environmental change mainly affected labor outcomes via production factors.

Spatial equilibrium effects are observable in specific market segments.

Minimal human capital loss was observed despite environmental alterations.

Abstract

This paper examines the labor market impacts of the 2015 Mariana Dam disaster in Brazil. It contrasts two theoretical models: an urban spatial equilibrium model and a factor of production model, with diverging perspectives on environmental influences on labor outcomes. Utilizing rich national administrative and spatial data, the study reveals that the unusual environmental alteration, with minimal human capital loss, primarily affected outcomes via the factor of production channel. Nevertheless, spatial equilibrium dynamics are discernible within certain market segments. This research contributes to the growing literature on environmental changes and its economic consequences.