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Floods and firms: vulnerabilities and resilience to natural disasters in Europe

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Abstract

Combining a rich database on natural hazards, granular flood risk maps and detailed information on firm geolocalisation, we study the dynamic impacts of floods on European manufacturing firms during the period 2007-2018. We find that water damages significantly and persistently worsen firm performance, and may endanger their survival. An average flood deteriorates total assets by about 2% in the year after the event, and up to 5% seven years out. The drop in sales and employment is comparable. We show how reallocation of economic activity within flooded regions can reconcile our results with the 'creative destruction' hypothesis proposed by the natural disaster literature.

Suggested Citation

  • Fatica, Serena & Katay, Gabor & Rancan, Michela, 2022. "Floods and firms: vulnerabilities and resilience to natural disasters in Europe," Working Papers 2022-13, Joint Research Centre, European Commission.
    • Handle: RePEc:jrs:wpaper:202213
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    File URL: https://joint-research-centre.ec.europa.eu/publications/floods-and-firms-vulnerabilities-and-resilience-natural-disasters-europe_en
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    Cited by:

    1. Bellocca, Gian Pietro Enzo & Alessi, Lucia & Poncela Blanco, Maria Pilar & Ruiz Ortega, Esther, 2023. "Effects of extreme temperature on the European equity market," DES - Working Papers. Statistics and Econometrics. WS 37973, Universidad Carlos III de Madrid. Departamento de Estadística.

    More about this item

    Keywords

    natural disasters; floods; climate risk; firm performance; panel local projections;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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