Natural events and performance of micro firms: the impact of floods on shops in Uganda

The impact of natural events on local economy is a key issue on the agenda of policymakers around the world and particularly in developing countries. This paper discusses the impact of floods on micro businesses development. We provide evidence on how the frequency of events is correlated with shops business performance in Uganda. We exploit a unique dataset from a direct survey on micro retail shops within a project launched by the Ministry of Lands Housing and Urban Development. Data come from a survey on 13 cities and villages where floods occur regularly and are a major problem for population. After controlling for both shop manager and business characteristics, expectedly we find that floods impact negatively on business performance. However business performance is likely to decrease less when events occur with more frequency. This may indicate a sort of adaptation behaviour by shop managers when floods occur regularly. Also, the significance of shop manager’s individual characteristics suggests that policies for boosting micro business should improve human capital, with peculiar attention to women and young people. Our findings also suggest that encouraging some forms of network economies may positively impact business performance.