Association for Public Policy Analysis & Management

Climate change has increased the incidence and severity of temperature and precipitation shocks affecting agricultural production. Observed levels of adaptation remain low, suggesting that rural households are constrained or adaptation decisions are suboptimal. I integrate panel socioeconomic and demographic data from rural Mexico with high temporal and spatial resolution weather data to assess if individuals adapt to the heat-induced crop losses of neighboring households via anticipatory (ex ante) labor responses. I instrument for the proportion of catastrophic crop loss reports in a community with exogenous variation in extreme daily temperatures to obtain estimates of ex ante migration and local labor reallocation for households that have not experienced recent crop shocks but observe the heat-induced crop losses of others. I find evidence of domestic migration in anticipation of crop shocks, particularly among females and households with lower land-labor ratios. I also show evidence of local labor reallocation onto household land (agricultural self-employment), especially among males and households with higher land-labor ratios. This study highlights the substantial influence of the environment-agriculture mechanism, the salience of anticipatory adaptation, and the relevance of learning from others in the context of climate risk. These findings have important implications for the design and targeting of rural climate change mitigation programs, suggesting that adaptation gaps are likely overstated and that rural households have different capacities to mitigate the risks associated with climate shocks.