The economic cost of floods in Vietnam: a DMSP-OLS night-time imagery analysis

This paper studies the economic cost of floods in Vietnam via nightlight data obtained by DMSP-OLS satellites. A panel dataset from 1992 to 2010 is constructed and analyzed for Vietnam’s 56 provinces, making for a total of 1197 observations. The results obtained via the random effects model, which was found to be most applicable, showed a 0.12% decrease in nightlight emission due to a single flood, -799 in absolute terms. Similar results were obtained by a pooled ordinary least square regression and a fixed effects model. With a nightlight to gross domestic product elasticity between 0.27 and 0.3, a cost estimate per flood was calculated to be between 23 and 26 million US dollars (constant 2010 USD). Annually, with an average of 44 floods, corresponding to a reduction of 1.4 to 1.6 percent in real GDP, or 975 million to 1.1 billion USD in absolute terms. A prolonged effect was found as floods in the previous year affected the nightlight negatively, the second lag was found to have a positive correlation indicating a recuperation effect.