The Impact of Natural Disasters on Firm Growth in Vietnam: Interaction with Financial Constraints

U.S.E Discussion Paper No. 17-20

53 Pages Posted: 5 Jan 2018

See all articles by Fujin Zhou

Fujin Zhou

Utrecht University School of Economics

W.J.W. Botzen

VU University Amsterdam - Institute for Environmental Studies (IVM)

Date Written: December 18, 2017

Abstract

The theory on the disaster impacts on firm growth is ambiguous and the empirical evidence on this topic is scarce, which hampers the design of disaster risk reduction and climate change adaptation policies. This paper estimates growth models of the impacts of natural disasters on labour, capital, and value-added growth of firms in the short run, and identifies the role of financial constraints in shaping disaster outcomes. The analysis uses a comprehensive enterprise census data (2000-2009) and also two different types of disaster measures from Vietnam: the physical intensity measures and the socioeconomic damage measures. We apply the Blundell-Bond generalized method of moments (GMM) to estimate firm level disaster impacts, and find robust evidence that natural disasters on average increase firm growth significantly. We also find stronger positive impacts in labour and output growth for more constrained firms. We argue that this occurs because financially more constrained firms substitute labour for capital during the reconstruction phase after a disaster.

Keywords: Natural Disaster, Disaster Impact, Firm Growth, Financial Constraints, Disaster Measure

JEL Classification: D22, D24, Q44, Q51, Q54, Q56

Suggested Citation

Zhou, Fujin and Botzen, W.J.W., The Impact of Natural Disasters on Firm Growth in Vietnam: Interaction with Financial Constraints (December 18, 2017). U.S.E Discussion Paper No. 17-20, Available at SSRN: https://ssrn.com/abstract=3095539 or http://dx.doi.org/10.2139/ssrn.3095539

Fujin Zhou (Contact Author)

Utrecht University School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, +31 30 253 7373 3584 EC
Netherlands

HOME PAGE: http://https://www.uu.nl/medewerkers/FZhou

W.J.W. Botzen

VU University Amsterdam - Institute for Environmental Studies (IVM) ( email )

De Boelelaan 1115
Amsterdam, 1081 HV
Netherlands

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