Using satellite-observed geospatial inundation data to identify the impacts of flood on firm-level performances: The case of China during 2000–2009

• Main Authors: CHANG, Pao-Li, ZHENG, Fan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: floods; natural disasters; firm performance; China; Economics; Regional Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2653; https://ink.library.smu.edu.sg/context/soe_research/article/3652/viewcontent/Flood.pdf
• Institution: Singapore Management University

Among the first in the literature, this paper combines high-resolution satelliteobserved inundation maps with geocoded firm-level data to identify the flood exposure at the firm level. We apply the methodology to study the impact of floods on microlevel firm performances in China for the period 2000–2009. Being hit by a flood is associated with an annual loss of output and productivity of around 6% and 5%, respectively, which persists in the long run. The effects are heterogeneous across types of firms and locations of the floods. Firms that are tangible-asset intensive are more negatively affected by the flood events. Meanwhile, the effects on firms located in flood-prone counties are less severe and shorter-lived, suggesting better adaptation of firms experienced with floods. The impacts of floods extend to non-inundated firms in surrounding areas (of 4 kilometres in radius), but the negative effects are much smaller (2% on average) and diminish after three years. Firms beyond the immediate neighborhood expand their output from the third year onwards, in contrast with the permanent shrinkage of the inundated firms. By aggregating the firm-level data to the county level, we further identify negative effects of floods at the extensive margin: the firm exit (entry) rate is higher (lower) in counties that are hit by floods, and the effects are stronger in counties subject to more severe floods.