Natural Disasters and Firms in Vietnam
| Author | Tam B. Vu,Ilan Noy |
| Published date | 01 August 2018 |
| DOI | http://doi.org/10.1111/1468-0106.12184 |
| Date | 01 August 2018 |
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NATURAL DISASTERS AND FIRMS IN VIETNAM
TAM B. VUUniversity of Hawaii
ILAN NOY*Victoria University
Abstract. We investigate the consequences of natural disasters on operating firms in Vietnam, and
find evidence of adverse effects of disasters on retail sales accompanied by increases in firm invest-
ment of very similar magnitude. There are important spatial differences, with the post-disaster
increase in investment unique to the largest cities and provinces with large urban concentrations.
We find that more remote rural areas, especially in the North, experience declines in firm sales
without the mitigating boost to investment in the disasters’aftermath. The decline in firms’sales does
not appear to be associated with declines in household incomes in those regions.
1. INTRODUCTION
Over the past decade, increasing attention has been paid worldwide to the
impacts of natural disasters on economic activity, particularly in East Asia in
the wake of several recent catastrophic events: the Indian Ocean tsunami in
2004, cyclone Nargis and the Sichuan earthquake, both in 2008, and the Tohoku
earthquake–tsunami–nuclear disaster of 2011. Increased public and policy
awareness of extreme climatic events is also driven by the growing awareness
of global climate change.1
The literature that assesses the economic consequences attributed to natural
disasters either focuses on macroeconomic indicators such as GDP or trade
flows, or on household income, wealth and spending. For developing countries,
we know of no papers that focus on the operations of firms in the aftermath of
disasters, and very few that distinguish impacts across different subnational
regions. Understanding the impact of disaster shocks on firms is clearly an essen-
tial piece of the puzzle if we are to more fully understand the general impact of
external shocks on economic activity. It is plausible that the impact may be
different across geographical regions, and that this difference is associated with
access to central government resources and general credit availability in the
disaster’s aftermath. Here, we focus on Vietnam, which we view as an interesting
case study for several reasons.
First, and foremost, Vietnam is highly exposed. Given its latitude and
extensive coastline, the country, and especially the central coast, is very vulner-
able to typhoons and the associated wind damage, as well as wave surges and
storm-fed inland floods they generate; the latter are typically associated with
*Address for Correspondence: School of Economics and Finance, Victoria University, POB 600,
Wellington 6140, New Zealand. E-mail: ilan.noy@vuw.ac.nz.
1On the region’s vulnerability to disasters, see Noy (2014). There is little doubt that changing atmo-
spheric conditions and weather patterns will lead to changes in the spatial distribution of disasters,
and, in particular, the emergence of disasters (floods, storms, droughts and extreme temperatures)
in areas that were previously considered less vulnerable.
Pacific Economic Review,••:•• (2016)
doi: 10.1111/1468-0106.12184
© 2016 John Wiley & Sons Australia, Ltd
Vietnam’s two large river systems (the Red River in the North and the very large
Mekong Delta in the South, as shown in Fig. 1). to floods associated with the
rainy season in the mountainous areas, especially the Central Highlands and
the Northwest. Table 1 provides some information about the spatial distribution
of natural disasters across Vietnam’s eight regions.
Second, typhoons and floods are more predictable events, both their long-
term probability distributions, and the very near-term predictions of their
arrival. As such, they pose a different set of issues regarding disaster prevention
and mitigation, and associated damages, than events that are still largely
unpredictable, such as earthquakes, tsunamis and volcanic eruptions (see
Table 2 for information about the distribution of event types across regions in
Vietnam). The specific adverse impacts we find are, thus, doubly surprising given
this predictability.2
Third, Vietnam, a lower–middle income country in its early stages of rapid
development but with very high rates of literacy and public investment, offers
an interesting juxtaposition of relative poverty but a high ability to mobilize
resources (human and otherwise) for both prevention/mitigation and for post-
disaster recovery.
Fourth, the data available for Vietnam, both the provincial data on disasters
from Desinventar and the province-level data on firms, enables us to employ a
different strategy for identifying impacts than has previously been applied. We
provide more details on that below.
Figure 1. The four aggregate disaster measures for 2000–2011.
Note: HDAP, the number of house damaged per capita; HDEP, the number of
house destroyed per capita; INJP, the number of people injured per capita;
KILP, the number of people killed per capita.
Source: desinventar.net.
2Advances in scientific knowledge are bound to improve the predictability of geo-physical events
(and that is clearly happening for volcanic eruptions), so that the findings regarding climatic events
may hint at future limits of damage mitigation in the aftermath of geophysical disasters as well.
T. B. VU AND I. NOY2
© 2016 John Wiley & Sons Australia, Ltd
Pacific Economic Review
, 23: 3 (2018) pp. 426–452
doi:10.1111/1468-0106.12184
© 2016 John Wiley & Sons Australia, Ltd
NATURAL DISASTERS AND FIRMS IN VIETNAM
TAM B. VUUniversity of Hawaii
ILAN NOY*Victoria University
Abstract. We investigate the consequences of natural disasters on operating firms in Vietnam, and
find evidence of adverse effects of disasters on retail sales accompanied by increases in firm invest-
ment of very similar magnitude. There are important spatial differences, with the post-disaster
increase in investment unique to the largest cities and provinces with large urban concentrations.
We find that more remote rural areas, especially in the North, experience declines in firm sales
without the mitigating boost to investment in the disasters’aftermath. The decline in firms’sales does
not appear to be associated with declines in household incomes in those regions.
1. INTRODUCTION
Over the past decade, increasing attention has been paid worldwide to the
impacts of natural disasters on economic activity, particularly in East Asia in
the wake of several recent catastrophic events: the Indian Ocean tsunami in
2004, cyclone Nargis and the Sichuan earthquake, both in 2008, and the Tohoku
earthquake–tsunami–nuclear disaster of 2011. Increased public and policy
awareness of extreme climatic events is also driven by the growing awareness
of global climate change.1
The literature that assesses the economic consequences attributed to natural
disasters either focuses on macroeconomic indicators such as GDP or trade
flows, or on household income, wealth and spending. For developing countries,
we know of no papers that focus on the operations of firms in the aftermath of
disasters, and very few that distinguish impacts across different subnational
regions. Understanding the impact of disaster shocks on firms is clearly an essen-
tial piece of the puzzle if we are to more fully understand the general impact of
external shocks on economic activity. It is plausible that the impact may be
different across geographical regions, and that this difference is associated with
access to central government resources and general credit availability in the
disaster’s aftermath. Here, we focus on Vietnam, which we view as an interesting
case study for several reasons.
First, and foremost, Vietnam is highly exposed. Given its latitude and
extensive coastline, the country, and especially the central coast, is very vulner-
able to typhoons and the associated wind damage, as well as wave surges and
storm-fed inland floods they generate; the latter are typically associated with
*Address for Correspondence: School of Economics and Finance, Victoria University, POB 600,
Wellington 6140, New Zealand. E-mail: ilan.noy@vuw.ac.nz.
1On the region’s vulnerability to disasters, see Noy (2014). There is little doubt that changing atmo-
spheric conditions and weather patterns will lead to changes in the spatial distribution of disasters,
and, in particular, the emergence of disasters (floods, storms, droughts and extreme temperatures)
in areas that were previously considered less vulnerable.
Pacific Economic Review,••:•• (2016)
doi: 10.1111/1468-0106.12184
© 2016 John Wiley & Sons Australia, Ltd
Vietnam’s two large river systems (the Red River in the North and the very large
Mekong Delta in the South, as shown in Fig. 1). to floods associated with the
rainy season in the mountainous areas, especially the Central Highlands and
the Northwest. Table 1 provides some information about the spatial distribution
of natural disasters across Vietnam’s eight regions.
Second, typhoons and floods are more predictable events, both their long-
term probability distributions, and the very near-term predictions of their
arrival. As such, they pose a different set of issues regarding disaster prevention
and mitigation, and associated damages, than events that are still largely
unpredictable, such as earthquakes, tsunamis and volcanic eruptions (see
Table 2 for information about the distribution of event types across regions in
Vietnam). The specific adverse impacts we find are, thus, doubly surprising given
this predictability.2
Third, Vietnam, a lower–middle income country in its early stages of rapid
development but with very high rates of literacy and public investment, offers
an interesting juxtaposition of relative poverty but a high ability to mobilize
resources (human and otherwise) for both prevention/mitigation and for post-
disaster recovery.
Fourth, the data available for Vietnam, both the provincial data on disasters
from Desinventar and the province-level data on firms, enables us to employ a
different strategy for identifying impacts than has previously been applied. We
provide more details on that below.
Figure 1. The four aggregate disaster measures for 2000–2011.[Color figure can
be viewed at wileyonlinelibrary.com]
Note: HDAP, the number of house damaged per capita; HDEP, the number of
house destroyed per capita; INJP, the number of people injured per capita;
KILP, the number of people killed per capita.
Source: desinventar.net.
2Advances in scientific knowledge are bound to improve the predictability of geo-physical events
(and that is clearly happening for volcanic eruptions), so that the findings regarding climatic events
may hint at future limits of damage mitigation in the aftermath of geophysical disasters as well.
T. B. VU AND I. NOY2
© 2016 John Wiley & Sons Australia, Ltd
© 2016 John Wiley & Sons Australia, Ltd
NATURAL DISASTERS AND FIRMS IN VIETNAM 427
Pacific Economic Review
, 23: 3 (2018) pp. 426–452
doi:10.1111/1468-0106.12184
© 2016 John Wiley & Sons Australia, Ltd
NATURAL DISASTERS AND FIRMS IN VIETNAM
TAM B. VUUniversity of Hawaii
ILAN NOY*Victoria University
Abstract. We investigate the consequences of natural disasters on operating firms in Vietnam, and
find evidence of adverse effects of disasters on retail sales accompanied by increases in firm invest-
ment of very similar magnitude. There are important spatial differences, with the post-disaster
increase in investment unique to the largest cities and provinces with large urban concentrations.
We find that more remote rural areas, especially in the North, experience declines in firm sales
without the mitigating boost to investment in the disasters’aftermath. The decline in firms’sales does
not appear to be associated with declines in household incomes in those regions.
1. INTRODUCTION
Over the past decade, increasing attention has been paid worldwide to the
impacts of natural disasters on economic activity, particularly in East Asia in
the wake of several recent catastrophic events: the Indian Ocean tsunami in
2004, cyclone Nargis and the Sichuan earthquake, both in 2008, and the Tohoku
earthquake–tsunami–nuclear disaster of 2011. Increased public and policy
awareness of extreme climatic events is also driven by the growing awareness
of global climate change.1
The literature that assesses the economic consequences attributed to natural
disasters either focuses on macroeconomic indicators such as GDP or trade
flows, or on household income, wealth and spending. For developing countries,
we know of no papers that focus on the operations of firms in the aftermath of
disasters, and very few that distinguish impacts across different subnational
regions. Understanding the impact of disaster shocks on firms is clearly an essen-
tial piece of the puzzle if we are to more fully understand the general impact of
external shocks on economic activity. It is plausible that the impact may be
different across geographical regions, and that this difference is associated with
access to central government resources and general credit availability in the
disaster’s aftermath. Here, we focus on Vietnam, which we view as an interesting
case study for several reasons.
First, and foremost, Vietnam is highly exposed. Given its latitude and
extensive coastline, the country, and especially the central coast, is very vulner-
able to typhoons and the associated wind damage, as well as wave surges and
storm-fed inland floods they generate; the latter are typically associated with
*Address for Correspondence: School of Economics and Finance, Victoria University, POB 600,
Wellington 6140, New Zealand. E-mail: ilan.noy@vuw.ac.nz.
1On the region’s vulnerability to disasters, see Noy (2014). There is little doubt that changing atmo-
spheric conditions and weather patterns will lead to changes in the spatial distribution of disasters,
and, in particular, the emergence of disasters (floods, storms, droughts and extreme temperatures)
in areas that were previously considered less vulnerable.
Pacific Economic Review,••:•• (2016)
doi: 10.1111/1468-0106.12184
© 2016 John Wiley & Sons Australia, Ltd
Vietnam’s two large river systems (the Red River in the North and the very large
Mekong Delta in the South, as shown in Fig. 1). to floods associated with the
rainy season in the mountainous areas, especially the Central Highlands and
the Northwest. Table 1 provides some information about the spatial distribution
of natural disasters across Vietnam’s eight regions.
Second, typhoons and floods are more predictable events, both their long-
term probability distributions, and the very near-term predictions of their
arrival. As such, they pose a different set of issues regarding disaster prevention
and mitigation, and associated damages, than events that are still largely
unpredictable, such as earthquakes, tsunamis and volcanic eruptions (see
Table 2 for information about the distribution of event types across regions in
Vietnam). The specific adverse impacts we find are, thus, doubly surprising given
this predictability.2
Third, Vietnam, a lower–middle income country in its early stages of rapid
development but with very high rates of literacy and public investment, offers
an interesting juxtaposition of relative poverty but a high ability to mobilize
resources (human and otherwise) for both prevention/mitigation and for post-
disaster recovery.
Fourth, the data available for Vietnam, both the provincial data on disasters
from Desinventar and the province-level data on firms, enables us to employ a
different strategy for identifying impacts than has previously been applied. We
provide more details on that below.
Figure 1. The four aggregate disaster measures for 2000–2011.
Note: HDAP, the number of house damaged per capita; HDEP, the number of
house destroyed per capita; INJP, the number of people injured per capita;
KILP, the number of people killed per capita.
Source: desinventar.net.
2Advances in scientific knowledge are bound to improve the predictability of geo-physical events
(and that is clearly happening for volcanic eruptions), so that the findings regarding climatic events
may hint at future limits of damage mitigation in the aftermath of geophysical disasters as well.
T. B. VU AND I. NOY2
© 2016 John Wiley & Sons Australia, Ltd
Pacific Economic Review
, 23: 3 (2018) pp. 426–452
doi:10.1111/1468-0106.12184
© 2016 John Wiley & Sons Australia, Ltd
NATURAL DISASTERS AND FIRMS IN VIETNAM
TAM B. VUUniversity of Hawaii
ILAN NOY*Victoria University
Abstract. We investigate the consequences of natural disasters on operating firms in Vietnam, and
find evidence of adverse effects of disasters on retail sales accompanied by increases in firm invest-
ment of very similar magnitude. There are important spatial differences, with the post-disaster
increase in investment unique to the largest cities and provinces with large urban concentrations.
We find that more remote rural areas, especially in the North, experience declines in firm sales
without the mitigating boost to investment in the disasters’aftermath. The decline in firms’sales does
not appear to be associated with declines in household incomes in those regions.
1. INTRODUCTION
Over the past decade, increasing attention has been paid worldwide to the
impacts of natural disasters on economic activity, particularly in East Asia in
the wake of several recent catastrophic events: the Indian Ocean tsunami in
2004, cyclone Nargis and the Sichuan earthquake, both in 2008, and the Tohoku
earthquake–tsunami–nuclear disaster of 2011. Increased public and policy
awareness of extreme climatic events is also driven by the growing awareness
of global climate change.1
The literature that assesses the economic consequences attributed to natural
disasters either focuses on macroeconomic indicators such as GDP or trade
flows, or on household income, wealth and spending. For developing countries,
we know of no papers that focus on the operations of firms in the aftermath of
disasters, and very few that distinguish impacts across different subnational
regions. Understanding the impact of disaster shocks on firms is clearly an essen-
tial piece of the puzzle if we are to more fully understand the general impact of
external shocks on economic activity. It is plausible that the impact may be
different across geographical regions, and that this difference is associated with
access to central government resources and general credit availability in the
disaster’s aftermath. Here, we focus on Vietnam, which we view as an interesting
case study for several reasons.
First, and foremost, Vietnam is highly exposed. Given its latitude and
extensive coastline, the country, and especially the central coast, is very vulner-
able to typhoons and the associated wind damage, as well as wave surges and
storm-fed inland floods they generate; the latter are typically associated with
*Address for Correspondence: School of Economics and Finance, Victoria University, POB 600,
Wellington 6140, New Zealand. E-mail: ilan.noy@vuw.ac.nz.
1On the region’s vulnerability to disasters, see Noy (2014). There is little doubt that changing atmo-
spheric conditions and weather patterns will lead to changes in the spatial distribution of disasters,
and, in particular, the emergence of disasters (floods, storms, droughts and extreme temperatures)
in areas that were previously considered less vulnerable.
Pacific Economic Review,••:•• (2016)
doi: 10.1111/1468-0106.12184
© 2016 John Wiley & Sons Australia, Ltd
Vietnam’s two large river systems (the Red River in the North and the very large
Mekong Delta in the South, as shown in Fig. 1). to floods associated with the
rainy season in the mountainous areas, especially the Central Highlands and
the Northwest. Table 1 provides some information about the spatial distribution
of natural disasters across Vietnam’s eight regions.
Second, typhoons and floods are more predictable events, both their long-
term probability distributions, and the very near-term predictions of their
arrival. As such, they pose a different set of issues regarding disaster prevention
and mitigation, and associated damages, than events that are still largely
unpredictable, such as earthquakes, tsunamis and volcanic eruptions (see
Table 2 for information about the distribution of event types across regions in
Vietnam). The specific adverse impacts we find are, thus, doubly surprising given
this predictability.2
Third, Vietnam, a lower–middle income country in its early stages of rapid
development but with very high rates of literacy and public investment, offers
an interesting juxtaposition of relative poverty but a high ability to mobilize
resources (human and otherwise) for both prevention/mitigation and for post-
disaster recovery.
Fourth, the data available for Vietnam, both the provincial data on disasters
from Desinventar and the province-level data on firms, enables us to employ a
different strategy for identifying impacts than has previously been applied. We
provide more details on that below.
Figure 1. The four aggregate disaster measures for 2000–2011.[Color figure can
be viewed at wileyonlinelibrary.com]
Note: HDAP, the number of house damaged per capita; HDEP, the number of
house destroyed per capita; INJP, the number of people injured per capita;
KILP, the number of people killed per capita.
Source: desinventar.net.
2Advances in scientific knowledge are bound to improve the predictability of geo-physical events
(and that is clearly happening for volcanic eruptions), so that the findings regarding climatic events
may hint at future limits of damage mitigation in the aftermath of geophysical disasters as well.
T. B. VU AND I. NOY2
© 2016 John Wiley & Sons Australia, Ltd
© 2016 John Wiley & Sons Australia, Ltd
NATURAL DISASTERS AND FIRMS IN VIETNAM 427
© 2016 John Wiley & Sons Australia, Ltd
NATURAL DISASTERS AND FIRMS IN VIETNAM 427
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