Economic Growth and Employment Effects as a Result of the Upper Austrian Flood Protection Building Program

Starting in 2002, a continuous building of flood protection infrastructure aiming at pre - venting high monetary damages has been taking place in Upper Austria. As a result of investments in these flood protection measures between 2002 and 2015, significant posi - tive effects on the gross regional product as well as on the employment level have been generated. However, the macroeconomic effects are found to depend substantially on the import quota for required materials.


Introduction
Austria has always been confronted with flood situations, which pose a threat to the inhabitants of the particular areas and cause enormous monetary damages. Since the turn of the century, there have been 200-year floods just 11 years apart, one in August 2002 and the other one in June 2013. As a consequence, the state and federal Governments of Austria and Upper Austria, respectively, have been continuously investing into flood protection measures. The present study aims to quantify the value added and the effects on employment as a consequence of implementing the flood protection program and the measures therein. The main focus is on an ex-post analysis of the Upper Austrian economy between 2002 and 2015.
An assessment of the flood damages which were avoided due to making these investments is not the focus of this study. The damages caused by floods occurring in recent years are only rudimentarily documented. It is also noted that there is scarce or insufficient information on the economic costs of flood damage corresponding to social opportunity costs as these are not directly apparent from existing statistics [1].
Section 2 provides an overview of flood damages in Upper Austria between 2002 and 2013. In Section 3, the effects of the investments on the regional value added and the rate of employment are quantified on the basis of ex-post analyses. These are based on a comparative static assessment and a macroeconometric simulation by means of a dynamic time-series model. The conclusions of this study are drawn in Section 4.

Flood of 2002
The flood of August 2002 exceeded all floods in Austria since 1965/1966 [2]. It claimed nine lives and resulted in monetary damages of € 3 bn [3]. € 420 m of those monetary damages were covered by insurances, another € 414 m were covered by the disaster fund, resulting in a deficit of approximately € 2.2 bn [4,5]. Waterways Authority conducted a damage survey in their jurisdiction (e.g., damages to towpaths, the riverside and approach piers, silting up of harbor basins, aggradations, and suspended loads) along the Danube, March, and Thaya, estimating the damages caused by the flooding to amount to approximately € 3 m [6].
There have been different statements about the amount of damages in Upper Austria. According to Ref. [7], the flood in August 2002 caused total monetary damages of approximately € 464 m. 23.9% of the damages are apportioned to households, 49.6% to companies, 7.8% to agriculture and forestry, and 18.7% to the public sector. More than twice as much, approximately € 1.1 bn of monetary damages were reported by a territorial council at a press conference on March 9, 2013. € 500 m thereof are apportioned to the Upper Austrian Machland, a region and a cultural landscape along the Danube. The Upper Austrian agriculture faced monetary damages of € 11.6 m. A total of approximately 10,500 ha of agricultural land were affected [8].

Flood of 2002
The

Flood protection
In general, an increase in severe flood disasters can be observed [7]. Due to those flood events, efforts in the area of flood protection have been intensified. In 2005, the largest flood protection program to date was launched in Upper Austria. Thus, the damages of the flood in 2013 could be reduced from € 1.1 bn to one-fifth to a quarter, despite being more severe than the flood in 2002 [11]. Data about the amount of investment into the flood protection program vary between € 690 and 700 m over the period from 2002 to 2015 [12,13]. The average infrastructure investment costs per year of approximately € 50 m are similar to those in the assessment of alternative flood control policies in the Netherlands [14]. For another flood protection project in the Eferdinger basin, a budget of € 250 m is available for the implementation period from 2014 to 2022 [15].

Economic ex-post analysis of the Upper Austrian flood protection program
This section investigates the effects of the investments into flood protection in Upper Austria in the period from 2002 to 2015. As shown in Ref. [16], the effects on the regional economy (e.g., employment) play an important role within the decision-making of environmental adaption measures. In the present study, the economic effects are calculated by two methods, applying comparative static analysis on one hand (see Section 3.1) and a dynamic simulation (see Section 3.2) based on the macroeconomic simulation model MOVE2 [17] on the other hand. Since this is an ex-post analysis, the primary research question is defined as follows: what economic contribution with regard to employment and value added has been created in the past (2005-2015) by the Upper Austrian flood protection construction program?

Comparative static analysis
The data of investments made between 2002 and 2015 within the context of flood protection are used as an input for the dynamic simulation of the economic effects in Upper Austria (see Section 3.2). For the period of time between 2002 and 2015, overall investments of approximately € 690 m were made (see Figure 1 and Tables 1 and 2 for a temporal aggregation and arrangement according to specific measures). All data were provided by the Upper Austrian Government, Environment and Water Management and are identical to the data in Ref. [1]   The types of financing also are considered (see Table 3). Analogous to Ref. [1], there are three different types of financing: (1) federal funds, (2) state funds, and (3) funds from interested parties. As shown in Table 3, approximately 39% (€ 265 m) are accounted for by federal funds, approximately 52% (€ 361 m) by state funds, and approximately 9% (€ 64 m) by interested parties.
As imports may lead to outflows of added value, parts of the investments do not take effect in Upper Austria. Analogous to Ref. [1], three scenarios with different import quotas (0, 10, and 20%) are defined for construction services within the scope of immediate measures, flood 1 Measures of the Austrian Ministry for Transport, Innovation and Technology along the Danube in Upper Austria. Flood Risk Management protection measures, torrent control and immediate measures, and maintenance as well as projects related to the Danube (see Table 4).

Dynamic simulation analysis
The input for the dynamic analysis of economic effects in Upper Austria with the simulation model MOVE2 [17] is provided by the comparative statistic preparation of the data (see Section 3.1) of the investments which were made between 2002 and 2015 within the scope of the flood protection program. The focus is on macroeconomic effects due to the investments, whereas economic optimality, as for example examined in Refs. [18,19], is not assessed. The dynamic economic impacts of the investments into the flood protection program are described  Flood Risk Management below. In particular, the progression and interactions of the macroeconomic parameters such as gross regional product (GRP), investments, employment, and private consumption are observed and elucidated. For the general interpretation of the results, there has to be emphasized that the simulation result shows the difference of the two development paths of the model-the difference between the business-as-usual and the simulation scenario of each endogenous variable of the model-and not the absolute values of both scenarios as in the case of a prognosis model [17].
Over the period of 2002 until 2015, positive effects of the investments in flood protection on the Upper Austrian GRP can be observed at large (see Table 5 and Figure 2). For the time period from 2002 to 2015, the annual average increase of the GRP is approximately € 83, 78, or 73 m higher at import rates of 0, 10, or 20%, respectively.  Table 4. Investments affecting the value added.

Gross regional product
Import quota: 0% Import quota: 10% Import quota: 20% Investments into flood protection as well as the increase of private consumption of households between € 25 and 26 m per year (depending on the import quota) as a result of the induced effects of the investment impulses are the cause for this development (see Tables 6 and 7). The outflow of value added caused by imports of foreign materials or technologies is superimposed and thus weakened by the increase in exports as a result of the positive development of the economy. This results in net exports (difference between exports and imports) of approximately € 15, 10, or 6 m at import rates of 0, 10, or 20%, respectively (see Table 8).
As for the rate of employment (see Figure 3 and Table 9), as a result of the increase in GRP over the time period 2002-2015, an increase of 590, 520, or 460 persons can be observed at import rates of 0, 10, or 20, respectively. 60% of the additional employees originate from the construction sector.

Gross regional product
Import quota: 0% Import quota: 10% Import quota: 20% Note: Displaying of direct, indirect, and induced effects. Own calculations with the simulation model MOVE2 [17]. Table 5. Impacts on Upper Austria's gross regional product as a result of investments in flood protection measures, taking into account different import quotas, 2002-2015.

Conclusion
The study shows that the flood protection program has significant positive effects on Upper Austria's economy within the time frame from 2002 to 2015. Despite not quantifying the flood damages, which were avoided due to making the investments into flood protection, in this study, the extent of the economic effects suggest that the investments within the framework of the flood protection program are of great benefit from an economic perspective. The following points have to be emphasized.
• Positive effects of the investments into flood protection on the GRP can be obtained. Overall, the annual average increase of the GRP is approximately € 83, 78, or 73 m higher at import rates of 0, 10, or 20%, respectively.
• As a result of the increase in GRP over the time period, from 2002 to 2015, an increase in employment of 590, 520, or 460 persons can be observed at import rates of 0, 10, or 20%, respectively. 60% of the additional employees originate from the construction sector.
• As a result of the increase in employment, there is an increase of the gross income and thus private consumption, which generate positive effects on the economy. Investments into flood protection, as well as the increase of private consumption of households between € 25 and 26 m a year (depending on the import quota) as a result of the induced effects of the investment impulses, are the cause for this development.
• The outflow of value added caused by imports of foreign materials or technologies is superimposed and thus weakened by the increase in exports as a result of the positive development of the economy.
• Higher import quotas cause a smaller amount of the investments being effective on the value added and the rate of employment in Upper Austria.