Firm Level Evidence of Disaster Impacts on Growth in Vietnam

The theory about the impacts of natural disasters on firms is ambiguous and the empirical evidence on this topic is scarce, which hampers the design of disaster risk reduction and climate change adaptation policies. In this paper we identify the short-run impacts of storms and floods on firm growth in labor, capital, and sales, using Enterprise Census data (2000–2014) for Vietnam. We define storms and floods with three different disaster measures: physical intensities, number of deaths, and economic damage. The performance of these disaster measures is compared by estimating dynamic growth models using the Blundell–Bond system generalized method of moments. We find evidence that flooding increases labor growth and capital growth but reduces sales growth significantly up to 3 years after flooding. We also find some evidence of positive impacts on labor growth and capital growth but mostly negative impacts on sales growth for storms within 3 years after storms strike. The impacts of floods and storms on firm growth are more pronounced and persistent for small and medium sized firms. Finally, unlike at the macro level, the direction and scale of disaster impacts found at the firm level are fairly consistent across the three disaster measures.