Down the River: Labor Market Effects of Brazil's Worst Environmental Disaster

Employer concentration shapes who bears the cost of an environmental shock. We show this using Brazil’s 2015 Fundão dam collapse, a sudden disaster that contaminated 650 kilometers of the Doce River with mining waste. With matched employer-employee data and a difference-in-differences design across watershed boundaries, formal wages fell 1.8 percent while job separations, job-to-job transitions, and migration held flat. Workers absorbed the shock through lower pay, not reallocation. The wage decline falls almost entirely on workers in concentrated labor markets, scales with baseline concentration, persists outside mining, and is sharpest where contamination and employer power coincide. Estimating labor supply to the firm directly, we find an elasticity near 0.55, far below competitive levels, implying pay near a third of marginal product. The foregone wages, from US$158 million over three years to US$1.16 billion in perpetuity, appear in no settlement, including the US$31.7 billion Definitive Settlement.