Economic Scenarios of Flood Risks - a Look at Regional Development

Protection from the threats posed by water in the Netherlands has a centuries old history. Remarkably, if one takes a historical prospective, it becomes apparent that water protection policy has not changed much through time. In fact, one may detect a certain “path dependency”. Today many experts agree that “technocratic” philosophy of raising dikes (though now upgraded with certain new techniques for water retention) has reached the limits of its development cycle. This means that new solutions have to be found to guarantee long run sustainability under conditions of increasing risk of sea level rise. A number of implications for regional development are addressed in this paper. We will present a novel way of thinking about the complex flood protection problem in a densely populated country with a highly developed economic network. Basically, a large-scale disaster hitting an industrial area causes (temporary) businesses closure and thus production breakdown, thereby generating distortions in the whole economic network. We present a first effort to model such distortions using an adapted Input-Output (I-O) model. In contrast to the existing I-O models, our model is able to deal with production disturbances and emerging disequilibria on the market, which has not been the case before. As a result, we can explore various flood scenarios and describe possible recovery paths. Here we shall focus our analysis on the regional structure. The Western provinces of the Netherlands, the areas most prone to flooding, are industrially highly developed. Once such a province has been hit, this may have direct and indirect consequences for other regions in the medium and long term. For example, other (peripheral) areas of the country may experience an incentive for output growth, overtaking the lost production from the central part to satisfy demand needs. Using inter-regional input-output tables for the Netherlands we show how in principle the sectoral composition of the provinces may change in the aftermath of a calamity. Furthermore, this may have implications for the bordering countries as well as for specific parts all over Europe. Our proposed approach is not only a device to study possible regional change as a result of a disaster; it can also serve an instrument for policy advice. This may assist policymakers in thinking about the long-run dynamics in regional development strategies.