CIP session 12: Firm-level Impact with Regression Analysis

Question 1

Why do we need a micro-economic model?

Answer 1

To evaluate firm impacts in terms of loss of labor and physical damage. The design of adaptation policies also required for understanding how disaster impact indivuduals and businesses and how they respond to disasters.

Question 2

What are flooding impacts on firms?

Answer 2

• Loss of labor
• Physical damage (buildings, machinery and equipment, materials etc.)

Question 3

How does the Difference-In-Differences approach work?

Answer 3

It is assumed firm A and firm B have the same growth patterns if there was no flood in region A.
The performance after and before the flood between region A and region B can be interpreted as the flood impact.
Treatment group = region with flood
Control group = region without flood

Question 4

Cautions for DID

Answer 4

• There is data limitations because the flood impact may vary across firms with different damages
• There is an omitted variable bias where firms in region A could be systematically different from firms in region B

Question 5

Influence share Intagible Assets

Answer 5

Higher share of intangible assets (SIA) tends to promote positive flood impacts for production factors (capital & labor) and mitigates negative flood effects on productivity