Analyzing the Implications of Climate Change on Labor Markets and Economic Growth in Emerging Economies

Abstract

The relationship between environmental degradation and macroeconomic stability is becoming an increasingly important focus as climate change becomes more volatile. This paper, it explores the complex implications of climate change on the economy and labor market, particularly the peculiarities of emerging countries. While environmental concerns have received greater attention, there is still lacks an investigation into how labor productivity dynamics and structural transformation can be considered in growth models of developing economies. Using qualitative-empirical methodology, which combines existing research with case studies and theory, such as Lewis Model of Structural Transformation and Endogenous Growth Theory, the results show that climate-induced heat stress serves as a systematic shock to the supply side, mainly by decreasing Total Factor Productivity and accelerating distress migration from agriculture, a climate-sensitive sector, to low-productivity informal sectors. In addition, it can be observed from the analysis that the speed at which economic recovery takes place is directly determined by institutions, as countries endowed with well-functioning regulatory structures and technological adaptations are considerably more resilient than those whose progress is constrained due to a lack of financial resources and exploitative political systems. According to the study, for a Just Transition to take place, it will be necessary to alter the current approach adopted in policies such that emphasis is placed on worker-based adaptation through increased social protections and green skill development.