Labour forced impacts and production losses due to the 2013 flood in Germany

During May and June 2013 heavy rains caused disastrous floods in several countries in Europe. In this study we use a new high-resolution model of the German economy to simulate the post-disaster economic shock of the flood. Due to the heavy reliance of modern economies on inter regional supply chains, substantial economic impacts are felt in states and industries outside the flooded area. Cessation of export from one industry, for example in Bayern, in the wake of the flood affects many other industries and regions. Trade links are broken immediately and cause shortages. Supply restrictions from those industries spread further, reducing production possibilities in the national and global economy. Industry- and region specific direct impacts are estimated from time series data about compensations of lost working hours from social insurance schemes in the case of external events such as business cycles and natural disasters. We estimate the total indirect loss of production possibilities that affect in particular the motor vehicle and food industries in Baden-Wurttemberg, Nordrhein-Westfalen and Niedersachsen, but also foreign production, to be €6.2 billion. Regions and industries outside the flooded area experience around €400 million of the loss. We find the economic impact of the flood to be much higher as in previous studies and mitigation is more likely to be considered if this effect is taken into account.