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Open AccessArticle

Multi-Scale Assessment of the Economic Impacts of Flooding: Evidence from Firm to Macro-Level Analysis in the Chinese Manufacturing Sector

1
Labor and Worklife Program, Harvard Law School, Harvard University, Cambridge, MA 02138, USA
2
Environmental Change Institute, University of Oxford, Oxford OX1 3QY, UK
3
Grantham Research Institute on Climate Change and the Environment, London School of Economics, London WC2A 2AZ, UK
4
Institute for New Economic Thinking, Oxford Martin School, University of Oxford, Oxford OX2 6ED, UK
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(7), 1933; https://doi.org/10.3390/su11071933
Received: 28 December 2018 / Revised: 15 March 2019 / Accepted: 15 March 2019 / Published: 1 April 2019
(This article belongs to the Special Issue Natural Disasters and Economics)
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Abstract

We present an empirical study to systemically estimate flooding impacts, linking across scales from individual firms through to the macro levels in China. To this end, we combine a detailed firm-level econometric analysis of 399,356 firms with a macroeconomic input-output model to estimate flood impacts on China’s manufacturing sector over the period 2003–2010. We find that large flooding events on average reduce firm outputs (measured by labor productivity) by about 28.3% per year. Using an input-output analysis, we estimate the potential macroeconomic impact to be a 12.3% annual loss in total output, which amounts to 15,416 RMB billion. Impacts can propagate from manufacturing firms, which are the focus of our empirical analysis, through to other economic sectors that may not actually be located in floodplains but can still be affected by economic disruptions. Lagged flood effects over the following two years are estimated to be a further 5.4% at the firm level and their associated potential effects are at a 2.3% loss in total output or 2,486 RMB billion at the macro-level. These results indicate that the scale of economic impacts from flooding is much larger than microanalyses of direct damage indicate, thus justifying greater action, at a policy level and by individual firms, to manage flood risk. View Full-Text
Keywords: natural disasters; flooding; indirect economic impact; manufacturing firms; China natural disasters; flooding; indirect economic impact; manufacturing firms; China
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Hu, X.; Pant, R.; Hall, J.W.; Surminski, S.; Huang, J. Multi-Scale Assessment of the Economic Impacts of Flooding: Evidence from Firm to Macro-Level Analysis in the Chinese Manufacturing Sector. Sustainability 2019, 11, 1933.

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