The impacts of other weather variables

In the next stage of the paper we also put the average annual temperature and the amount of rainfall into our estimating equation to investigate whether these additional factors associated with typhoons also had a significant impact on economic activity in the affected areas. The regression equation can be written as:

(10) (11) (12) (13) (14)

The results are shown in Tables 4.11 to 4.13 for typhoons below 119km and Tables 4.14 to 4.16 for the stronger typhoons.

127 / 346

[Table 4.11 about here]

[Table 4.12 about here]

[Table 4.13 about here]

[Table 4.14 about here]

[Table 4.15 about here]

[Table 4.16 about here]

Tables 4.11 to 4.16 show the impact of typhoons and other indirect factors on the affected area's economy. At wind speeds below 119 km/hr level, we still find a negative and significant impact of wind speed on TFP. In addition we find a strong negative and significant impact from high average annual temperatures on TFP in column (2) to (4) of Table 4.11. There is less evidence of a negative impact of typhoons on the number of employees in Table 4.12 but we still find consistent evidence that the higher annual average temperatures have a negative and significant impact on the number of workers in column (4) and output in Column (10). Rainfall does not appear to have any significant effect on any of our key performance variables. The typhoon and related weather estimator only have significant and negative impact on wages in the year the typhoon makes landfall. Finally, wind speed, rainfall and temperature all have a significant impact on production sales with the same correlation sign as we find in the previous results. We find similar results from Table 4.14 to 4.16 when the wind speed is below 178km/hr level albeit with larger coefficients as expected. The significant impact of wind speed on number of workers does appear to also hold for the year following the typhoon although interesting this becomes negative after two years. Table 4.13 and 4.14 show the same significant results on the impacts of typhoons on export value as in table 4.7 and 4.10.

The influence of typhoons on export still lasts for two years after typhoons hits for scale 3 in table 4.16. It suggests that manufacturing enterprises may take longer time to recover from stronger typhoon hits lead damage on both productions and consumptions.

128 / 346

6. Conclusions

In this chapter we build on the previous work in this thesis to combine the location and economic performance of manufacturing enterprise with historical typhoon tracks to provide highly disaggregated estimates of the impacts of typhoons on local economic activity along the east coastal of China. Using micro-level firm data allows us to overcome problems with the reliability and availability of economic activity data in China.

Our results show a negative and significant impact from wind speed and annual temperature on TFP, wages, production sales and export value. The impacts of stronger typhoons could be last longer in terms of production value and export value suggesting its stronger influence on productions and consumptions. The two year lagged value of rainfall has a significant and negative impact on number of workers when the wind speed is below 119 km/hr and 178km/hr level. In the time varying study of typhoon impacts, the typhoon damage may lead owners to hire more labour to help with the recovery and production rises quickly in the year following a typhoon hit. However, the negative impacts from two year lagged wind speed on the number of workers may suggest that workers are subsequently laid off. One possible reason that we did not find that many firms moved from the coastal regions into the rest of China is due to the benefits from a labour market pool, consumer markets and easy access to foreign market by lower transportation costs. These benefits may be perceived to more than cover for any losses due to typhoons. Besides, the rapid production recover from typhoons also helps to mitigate damage persistence on local economic activity.

From a policy perspective the important issue is how to minimize future losses and where to invest in the building of flood defences and infrastructure. While typhoons can be considered exogenous shocks, disasters risk should be considered endogenous. The concern, as pointed out by Burton (2004) is that there exists an "adaption deficit" where society responds only slowly to increases in disaster exposure. With insurance increasing popular and promoted in China the country should look to reduce barriers to individual insurance to encourage greater take up. This can include, as pointed out by Kunreuther (1996), reducing financial constraints and improving education through the provision of better information.

129 / 346

Chapter 6. Conclusions

The conclusions are concerned with implications for government policy of the geographic distribution of manufacturing industries and discuss how the results of our empirical study enlighten on the debate. A summary of our results by chapter as well as a comparison with our objectives is also provided. Some important issues remain excluded and we make a short discussion by postulating on potential future research in this area.

In general, this thesis discusses the geographic distribution of manufacturing industries and its determinants in mainland China. The exogenous impacts on the economic performance due to such a geographic distribution pattern is also examined. Our results provide some supports for the location theory and the agglomeration economy advantages of Marshall's externalities. Using predominantly mainland China micro-level manufacturing data, we employed various indices to estimate industrial agglomeration alluded to the location theory before estimating a succession of cross-sectional regressions that demonstrate for the determinants of industrial agglomeration. This thesis builds on the suggestive evidence of the existing literatures that study on the patterns and trends of industrial agglomeration in mainland China broadly. Our empirical results examined some of the previous findings and make some more detailed and pioneer discussions between the location of industry and its economic performance. The diversity of our results is reinforced in a number of ways: firstly, we compare the results on the pattern of industrial agglomeration across time by using key year's results.

Secondly, we compare our results with previous studies on some of the developed countries. Thirdly, we compare the results between the overall mainland China and an economic advanced municipality. Finally, we measure and compare our results at different region levels. In the econometric analysis, we also develop various indicators to study the impacts on the industrial geographic concentration in mainland China. In the final chapter, we link the geographic distribution of productions with natural disasters and examine the impacts of typhoon disasters to the production activity in the coastal regions of mainland China.