Salinization and Development,

Abstract

Climate change-intensified seawater intrusion creates a dual shock of transitory freshwater shortages and lasting soil degradation. We study its impacts on agricultural production in the Vietnamese Mekong Delta, a major rice exporter. Combining river salinity observations and detailed canal network data to map localized hydrological shocks, we find that salinity reduces rice yields but generates disproportionately larger declines in output and revenue. These losses are driven by a contraction in land under cultivation and limited substitution toward salt-resistant crops, pointing to constrained short-run adaptation. Using household and firm data, we further document reductions in own-farm employment alongside minimal transition to non-agricultural sectors, suggesting frictions in labor adjustment. Beyond income effects predicted by Engel curves, households reallocate expenditures toward healthcare and children’s schooling. The increase in schooling spending is driven by higher participation and may reflect shifts in opportunity costs, though we cannot rule out forward-looking responses.