@article {bnh-7089, title = {Disasters and economic resilience in small regional communities: the case of Toodyay}, number = {589}, year = {2020}, month = {07/2020}, institution = {Bushfire and Natural Hazards CRC}, address = {Melbourne}, abstract = {

Natural disasters in Australia are very costly, and often have devastating socioeconomic effects on impacted communities. Examples in the past decade include the Victorian Black Saturday Bushfires 2009 and the Queensland Floods 2010-11, which caused significant loss of life, losses across multiple sectors (including mining and agriculture), and damage to countless homes and properties. With the severity and frequency of natural disasters expected to increase (Kitching et al., 2014), there is growing academic and policy effort towards better understanding: the risks such disasters pose on Australian communities; the impacts they have on different industry sectors and community groups; and the role that disaster risk reduction can play in minimising such impacts and building disaster resilience.

Estimating the total economic costs of natural disasters can be difficult, owing to the lack of complete and systematic data, conceptual difficulties (Kousky, 2014) and divergent predictions from growth theory about the effects of natural disasters on economic growth (Loayza et al., 2012). While the literature is inconclusive, with some studies reporting negative effects and others positive or insignificant effects (Loayza et al., 2012), a recent meta-analysis of the literature showed evidence of negative impacts in terms of direct costs (Lazzaroni and van Bergeijk, 2014), with more severe disasters causing the highest damage and increasing the likelihood of long-term and/or negative consequences (Boustan et al., 2017; Kousky, 2014).

There is also evidence of distributional effects. Economic and human losses shown to be more pronounced in poorer countries (Schumacher and Strobl, 2011), and institutional factors and educational attainment levels found to be important determinants that influence resilience and recovery (Kousky, 2014; Felbermayra and Gr{\"o}schl, 2014). Economic diversity also matters. Relying on a single economic sector for income heightens community vulnerability and elongates disaster recovery time compared to diversified economies (Cutter et al., 2008). The type and interlinkages of economic sectors also play a significant role. Due to its land-intensive nature, the agricultural sector is often adversely affected (FAO, 2015). Locally, a study of major Victorian bushfires found that industries most susceptible to direct or indirect impacts are the Agriculture, forestry and fishing sector and retail trade (Stephenson, 2010). Conversely, the construction sector may experience a boom in the immediate aftermath of the disaster as households redirect expenditure towards rebuilding that they otherwise would have deferred, only to experience a lull in the next few years once that expenditure subsides (Kousky, 2014). Even with a diversified economy structure, the interdependence of sectors can have knock-on effects (Yu et al., 2014). Thus, industries more heavily reliant on inputs from the agricultural sector are likely to experience adverse effects to their production.

While these broader examinations are useful, aggregated numbers can mask or hide very large distributive impacts, as the typical instruments used (GDP and aggregated consumption) can be misleading measures of actual welfare losses (Hallegatte S, 2014). What is missing is a systematic understanding of how these broader economic impacts of natural disasters translate to the individual level vis-{\`a}-vis income effects; how long these effects persist; and which individuals within the community bear the brunt of these costs. Indeed, regardless of a country{\textquoteright}s economic development, a lower socioeconomic status has been consistently associated with greater post-disaster hardship (Norris et al., 2002), with the poor suffering significant disaster losses due to lower financial capacity and limited access to public and private (e.g. insurance) recovery assets (Blaikie et al. 1994; Gladwin and Peacock 1997). For example, while storm damage from Hurricane Katrina was uniform across demographic groups, it was lower income individuals who were less likely to have evacuated or own cover for flood insurance (Masozera et al. 2007). Many other known vulnerabilities to disasters, such as being female, old age, or with lower educational attainment (McKenzie and Canterford, 2016), are highly correlated or interdependent with income. The link between income and disasters also extends to mental health outcomes: In the case of bushfires, the longevity of disruptions to income post-disaster has been shown to materially affect the mental health of those affected by bushfires (Gibbs et al., 2016). Thus quantifying the effects of disasters based on these social and economic dimensions can help policymakers better target and evaluate disaster mitigation recovery programs.\ 

To that end, our research program explores the impact of a number of Australian natural disasters, of various types (fires, flood and cyclone), scales (small, large), and locational settings (regional, metropolitan) on the disaster-hit individuals{\textquoteright} economic resilience (measured through their income stream). It disaggregates these impacts on individuals based on who they are (their demographic attributes), if they work (unemployed, employed), how much they work (part-time, full-time) and the industries they work for.

This report investigates the income effects of the 2009 Toodyay bushfire on the income trajectory of residents of Toodyay {\textendash} a small regional town in Western Australia with a population of 4,450 around the time of the bushfire. The fire conditions were some of the worst seen in Western Australia at the time, and burnt around 2,900 hectares, the equivalent of 2\% of the Shire of Toodyay{\textquoteright}s total area. While no casualties were reported, the total cost of damages was estimated at $100 million (FESA, 2010b).

From a policy perspective, this report contributes to a greater understanding of the potential economic effects of natural disasters on individuals and communities living in small regional towns within Australia (FIGURE 1). Toodyay is fairly typical of such small, regional Australian towns, having an ageing population within the 1,000{\textendash}4,999 population range, and an economy historically linked to agriculture, mining and manufacturing; industries which are known to be sensitive to natural disasters (Ulubasoglu et al., 2019). Such towns (~1,700 in 2016) form 9.7\% of Australia{\textquoteright}s population and are mostly concentrated around Australia{\textquoteright}s eastern seaboard (ABS, 2018).

For Western Australia in particular, it is expected that agricultural businesses in currently marginal areas, such as the Wheatbelt region (in which Toodyay is located) are most at risk from climate change (Sudmeyer et al., 2016), and so deserve particular attention when considering disaster resilience in the state.

}, keywords = {bushfires, disasters, economic resilience, regional communities, Toodyay}, issn = {589}, author = {Mehmet Ulubasoglu} } @article {bnh-6994, title = {Disasters and economic resilience: the effects of the Black Saturday bushfires on individual income}, number = {580}, year = {2020}, month = {06/2020}, institution = {Bushfire and Natural Hazards CRC}, address = {Melbourne}, abstract = {

In an era when the reality of climate change is creating an uncertain future, it is imperative to consider the lasting impact this will have on Australia, which is historically prone to natural disasters. The increased possibility of more frequent and intense natural disasters present a number of issues for Australians, ranging from the impact on vulnerable communities to broader economic consequences.

In an effort to tackle this global phenomenon at a local level, we must turn our attention towards not only the actions required to support our businesses and communities but also to ensuring Australia is ready to adapt and become more economically disaster resilient in an ever changing environment. The urgency and delicacy of the matter is exacerbated when we consider that the average annual total economic cost of natural disasters in Australia is forecast to reach $39 billion per year by 2050 (Deloitte Access Economics, 2017) and that fiscal constraints will be imposed on government disaster expenditure due to Australia{\textquoteright}s aging population.

When a natural disaster strikes, the damages incurred are readily assessable in the immediate aftermath of the disaster. While this information is vital to the economic dimension of disaster resilience policy, it provides little integrity to analysing the direct impact such disasters have on the Australian people and, more specifically, communities and workforces that are more vulnerable to disaster.

To that end, the Disasters and Economic Resilience: The Effects of the Black Saturday Bushfires on Individual Income {\textendash} A Case Study explores the impact of the Black Saturday bushfires (BSBs) on the income trajectory of individuals in the labour force and residents of the disaster-hit Statistical Area-2s (SA2s). These areas are depicted in red and orange in FIGURE 1.

The 2009 Victorian Black Saturday bushfires were some of the worst bushfire conditions ever recorded globally; equivalent to 1500 of the atom bombs dropped on Hiroshima going off (SMH, 2009). One hundred and seventy-three people died; over 2,100 houses and 3,500 structures were destroyed, and thousands more suffered damage (Parliament of Victoria, 2010). The total area destroyed was around 400,000 hectares (CFA, 2009). The toll was estimated to be $3.1 billion in tangible damages and $3.9 billion in intangible costs (Deloitte Access Economics, 2016). To the best of our knowledge, this study is the first in the economics literature to examine the impact of a bushfire on individual income, considering demographic and sectoral heterogeneities at very fine units.

The report makes a unique assessment of economic resilience at an individual level (measured through changes in the income stream), and explores the effects of disaster-induced economic shocks transmitted to individuals through income-earning channels. In turn, this provides a deeper understanding of how income costs of disasters are borne by different areas of the workforce and assists policymakers in understanding the socioeconomics of natural disasters to better formulate public policies.

In an effort to assist policymakers contextualise our assessment at a broader social and economic level, this report amplifies the socioeconomic and disaster-resilience profiles of the disaster hit SA2s.

The findings of the report provide a distinctive variation from research to date by focusing on the way disasters such as the BSB affect individuals within a particular workforce and community, as well as their ability to economically cope with the ongoing effects of the disaster.

The report attempts to pinpoint the income effects observed in the BSB by using a difference-in-differences modelling approach. This approach compares the income changes of individuals living in the disaster-hit SA2s (treatment group) with those neighbouring SA2s that were not directly hit by the bushfires (control group). Because of their comparability, it is the control group that provides us with the income path that would have occurred for disaster-hit residents that were reported to be in the labour force in 2006, had the bushfires not happened, and thus enables us to compute any income deviations (losses or gains) arising from the bushfires. \ 

The report utilises the Australian Census Longitudinal Dataset (ACLD)[1], which provides a unique opportunity to robustly examine the bushfire{\textquoteright}s impacts across a longer timeframe (across 2006, 2011 and 2016) and across multiple dimensions (demographic and economic). All results we report are net results, post any disaster relief and recovery efforts; are relative to our baseline year (2006); and are compared to our control group. We define short-term results as changes over 2006{\textendash}11, and medium-term results as changes over 2006{\textendash}16.

Our framework was developed to capture income effects following the bushfires. Data limitations impede our ability to confirm some of the assumptions of our modelling approach, but we have taken a number of steps to alleviate the likely impact of these limitations on the reliability of our findings.

Nevertheless, to the best of our knowledge, our report is the first one utilizing three ABS Censuses to explore income effects of bushfires more comprehensively. Our findings offer compelling insights on how disasters like the BSB affect local economies, individuals within the community, and in turn their ability to economically cope with the ongoing effects of the disaster.

}, keywords = {Black Saturday, bushfires, disaster resilience, economic resilience, income}, issn = {580}, author = {Mehmet Ulubasoglu and Yasin Onder} } @article {bnh-6989, title = {Disasters and economic resilience: the effects of the Queensland Floods 2010-11 on individual income: a case study on the Brisbane River catchment area}, number = {577}, year = {2020}, month = {06/2020}, institution = {Bushfire and Natural Hazards CRC}, address = {Melbourne}, abstract = {

Australians are all too familiar with disasters arising from natural hazards like bushfires, cyclones, and floods. With climate change, we face the possibility of more frequent and intense natural hazards in new and unexpected places.

As we enter an uncertain decade, we find ourselves increasingly asking: What does a disaster-resilient Australia look like? How can we help our most vulnerable Australian communities endure the cumulative effects of frequent disasters? Amid tightening fiscal budgets, how can we create the right environment for our communities and economy to prosper in this new reality?

Answering these questions requires some deep thinking about the collective actions needed to support our communities, businesses, and the broader economy to become more disaster resilient; to not only adapt to a {\textquotedblleft}new normal{\textquotedblright} but thrive in a changing climate. From a policy perspective, this becomes more pertinent when we consider that the average annual total economic costs of natural disasters of Australia are forecast to reach $39 billion per year by 2050 (Deloitte Access Economics, 2017),[1] and the fiscal constraints that will increasingly be imposed on government disaster expenditure by Australia{\textquoteright}s aging population.

To that end, the Disasters and Economic Resilience: The Effects of the Queensland Floods 2010-11 on Individual Income {\textendash} A Case Study on the Brisbane River Catchment Area report explores the impact of the Queensland Floods 2010-11 on the income trajectory of employed residents of the four Brisbane River Catchment Area (BRCA) local government areas (LGAs) depicted in Figure 1.

The Queensland Floods 2010-11 remain one of Australia{\textquoteright}s costliest flooding events, causing an estimated $6.7 billion in tangible damages, with an overall cost of $14.1 billion (Deloitte Access Economics, 2016). To the best of our knowledge, this study is the first in the economics literature to examine the impact of a riverine-flooding in an Australian metropolitan economy on individual income, considering demographic and sectoral heterogeneities and post-disaster government assistance.

By focusing on individuals{\textquoteright} economic resilience (measured through changes in their income stream), the report explores how disaster-induced economic shocks can be transmitted to individuals vis-{\`a}-vis income-earning channels, and offers a greater understanding of how indirect costs of disasters are borne by different segments of the workforce. Such costs are currently less known compared to direct damages reported in the immediate aftermath of disasters.

By examining the economic dimension of disaster resilience at the individual level, our research helps policymakers better understand the socioeconomics of natural disasters and formulate public policies in a sustainable way that better distributes scarce budgets and resources towards vulnerable socioeconomic groups and industries of employment that are more sensitive to disasters.

Recognising the profound and long-lasting psychosocial impacts of the floods, the report outlines the socioeconomic and disaster resilience profiles of the BRCA LGAs, and provides additional information to contextualise our assessment so that policymakers can holistically interpret our findings, within the broader social and economic conditions arising from the floods.\ 

Isolating the effects of the floods from other shocks that hit the BRCA LGAs is challenging. The report attempts to pinpoint observed income effects to the Queensland Floods 2010-11 by using a difference-in-differences modelling approach. This approach compares income changes of individuals living in the BRCA LGAs (treatment group) with those living in comparable zones in Australia (control group). Because of their comparability, it is the control group which provides us with the income path that would have occurred for BRCA LGA employed residents had the floods not happened, and thus enable us to compute any income deviations (losses or gains) arisfrom the floods. \ 

The report utilises the Australian Census Longitudinal Dataset (ACLD), which provides a unique opportunity to robustly examine the flood{\textquoteright}s impacts across a longer timeframe (across 2006, 2011 and 2016) and across multiple dimensions (demographic and economic). All results we report are net results, post any disaster relief and recovery efforts; are relative to our baseline year (2006); and are compared to our control group. We define short-term results as changes over 2006-11, and medium-term results as changes over 2006-16.

While we develop the right modelling framework to capture income effects arising from the floods, data limitations have hampered our ability to statistically confirm that our control group is comparable to the BRCA LGA sample. The key implication is that our findings are not causal but correlational.

Nevertheless, our report{\textquoteright}s findings offer new and compelling insights on how disasters like the Queensland Floods 2010-11 interact with existing economic conditions and workforce compositions to affect individuals within the community, and in turn their ability to economically cope with the ongoing effects of the disaster.

}, keywords = {case study, disasters, economic resilience, Floods}, issn = {577}, author = {Mehmet Ulubasoglu and Farah Beaini} } @article {bnh-7006, title = {Disasters and economic resilience: the income effects of the Cyclone Oswald 2013 on small business owners}, number = {581}, year = {2020}, month = {06/2020}, institution = {Bushfire and Natural Hazards CRC}, address = {Melbourne}, abstract = {

"With five events in two years and the recently released Climate Commission Report that indicates our region can expect higher risk of heavy rainfall, there is a responsibility to at least identify the real cost to the community of flood events"\  {\textendash} Mark Pitt, CEO, North Burnett Regional Council (2013)

Small businesses are regarded as the backbone of Australia{\textquoteright}s economy, forming up to 98\% of Australian businesses and employing around 44\% of Australia{\textquoteright}s private sector workforce (Australian Bureau of Statistics, 2018). In some sectors like agriculture and construction, small businesses represent over 70\% of all businesses (Gilfillan, 2018).

Beyond employment, small businesses are integral to the social fabric of their communities, supporting local initiatives and providing important physical places for community members to socialise and engage with each other. This is especially true for regional areas with tight-knit communities.

Despite their economic importance, little empirical research has been done to understand the impact of natural disasters[1] on small businesses, and the efficacy of government assistance programs in promoting their recovery.

To that end, the Disasters and Economic Resilience: The income effects of Cyclone Oswald 2013 on Small Business Owners {\textendash} a case study on the Burnett River Catchment Area report explores the impact of ex-Tropical Cyclone Oswald 2013 on the incomes of small business owners residing in the four Burnett River Catchment local government areas (LGAs) depicted in FIGURE 1.

From 22 to 29 January 2013, Category 1 ex-tropical Cyclone Oswald moved across parts of Queensland and New South Wales, causing severe storms, flooding and tornadoes. The associated flooding and extreme weather events were declared a disaster in 53 Queensland LGAs, with the most devastating felt in the Bundaberg and North Burnett regions, damaging key infrastructure including sewerage systems and economically important assets including ports and road networks relied on by agricultural and manufacturing enterprises in the area. The record flooding in Bundaberg forced the evacuation of over 7,500 residents and damaged over 2,000 homes.

Thus, the flooding events associated with Cyclone Oswald that occurred in this region present a unique opportunity to causally investigate the impacts of a major disaster on small businesses in a regional community with an important agricultural base.

Isolating the effects of the floods from other shocks that hit the Burnett River catchment LGAs is challenging. The report pinpoints the income effects of Cyclone Oswald 2013 by using a difference-in-differences modelling approach. This approach compares the income changes of small business owners living in the Burnett River Catchment LGAs (treatment group) with those living in the comparable Richmond Valley LGAs in New South Wales (control group). Because of their comparability, it is the control group which provides us with the income path that would have occurred for the Burnett small business owners had the floods not happened, and thus enable us to compute any income deviations (losses or gains) arising from the associated flooding events.\ 

The report utilises the Australian Census Longitudinal Dataset (ACLD), which provides a unique opportunity to robustly examine the flood{\textquoteright}s impacts. Our results are net results, post any disaster relief and recovery efforts; are relative to our baseline year (2011); and are compared to our control group. As the Census date allow us to explore the effects up to three years post Cyclone Oswald, we define our 2011-2016 results as medium-term results.

}, keywords = {cyclone, disasters, economic resilience, income effects, small businesses}, issn = {581}, author = {Mehmet Ulubasoglu} }