Regional economic impact of flood disasters in Yangtze River Economic Zone: A TERM model with a decomposition analysis approach

Abstract

Flood disasters in the Yangtze River Economic Zone severely impact its economy and hinder sustainable development. These economic effects exhibit spatial heterogeneity, impacting both directly affected regions and causing inter-regional ripple effects. This study utilizes the enormous regional model of China, TERM, to assess the economic impact of floods in the zone and identify the sources of impact in disaster areas through decomposition analysis. This study reveals significant spatial heterogeneity in the economic and sectoral impacts of floods in the Yangtze River Economic Zone. Provinces in the middle and lower reaches of the zone experience substantial GDP losses, whereas regions outside the zone gain economic benefits. Sectors such as agriculture and water services in disaster areas, especially in Hunan and Hubei, suffer the most losses but experience positive ripple effects in non-affected areas. By contrast, the electricity shows a slight decline in output in most areas but increases in Sichuan, Guizhou, and Yunnan. Additionally, mining shows a significant decline in output in all regions. The economic impacts revealed through decomposition analysis can be attributed to local economic impact, negative ripple effects on surrounding areas, limited spillovers from Shanghai, and economic benefits in non-disaster areas. Assessing the regional economic impacts of floods based on this spatial heterogeneity is crucial for formulating effective regional disaster reduction policies.