Abstract:
I investigate the role of regulation and economic growth in shifting Brazil’s sugarcane industry from a polluting, manual harvest to a cleaner, mechanical harvest. I use worker- and establishment-level data to test the regulation using complementary regression discontinuity and difference-in-difference approaches. I find that regulation is, at best, a partial explanation, accounting for no more than one quarter of the rapid, widespread change in harvesting practices. I develop a tipping-point model to show how rising wages may have played an important role even though the change in wages was gradual and the change in harvesting was abrupt; instrumental variables estimates imply that increasing wages alone are sufficient to explain the adoption of green technology.