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

Xi Hu (), Raghav Pant (), Jim W. Hall (), Swenja Surminski () and Jiashun Huang ()
Additional contact information
Xi Hu: Labor and Worklife Program, Harvard Law School, Harvard University, Cambridge, MA 02138, USA
Raghav Pant: Environmental Change Institute, University of Oxford, Oxford OX1 3QY, UK
Jim W. Hall: Environmental Change Institute, University of Oxford, Oxford OX1 3QY, UK
Swenja Surminski: Grantham Research Institute on Climate Change and the Environment, London School of Economics, London WC2A 2AZ, UK
Jiashun Huang: Labor and Worklife Program, Harvard Law School, Harvard University, Cambridge, MA 02138, USA

Sustainability, 2019, vol. 11, issue 7, 1-18

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.

Keywords: natural disasters; flooding; indirect economic impact; manufacturing firms; China (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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