Assessment of the Regional Economic Impacts of Catastrophic Events: CGE analysis of resource loss and behavioral effects of a RDD attack scenario
AbstractUsing a large-scale CGE model, we investigate the short-run and long-run regional economic consequences of a catastrophic event - attack via radiological dispersal device (RDD) - centered on the downtown Los Angeles area. We distinguish two main routes via which such a catastrophic event might affect regional economic activity: (i) reduction in effective resource supply (the resource loss effect) and (ii) shifts in the perceptions of economic agents (the behavioral effect). Broadly, the resource loss effect relates to the physical destructiveness of the event, while the behavioral effect relates to changes in fear and risk perception on the part of firms, households and government. Both affect the size of the regional economy. RDD detonation (Dirty Bomb) causes little direct capital damage and few casualties, but generates substantial short-run resource loss via business interruption. Changes in fear and risk perception increase the supply cost of resources to the affected region, while simultaneously reducing demand for goods produced in the region. In both the short-run and long-run in the affected region, households may require higher wages to work, investors may require higher returns to invest, and economic agents may switch their preferences away from goods produced. We show that because perception effects may have lingering long-term deleterious impacts on both the supply-cost of resources to a region and willingness to pay for regional output, they have the potential to generate changes in real regional GDP that are much greater than those generated by the resource loss effect. Implications for policy that might mitigate these effects are discussed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number g-194.
Date of creation: Jan 2010
Date of revision:
Publication status: Published in Risk Analysis, Vol. 32(4), April 2012, pp. 583-600.
RDD; economic impact; terrorism; risk perception;
Find related papers by JEL classification:
- H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-20 (All new papers)
- NEP-CMP-2010-02-20 (Computational Economics)
- NEP-GEO-2010-02-20 (Economic Geography)
- NEP-URE-2010-02-20 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bird, R. & Menzies, G. & Dixon, P. & Rimmer, M., 2011.
"The economic costs of US stock mispricing,"
Journal of Policy Modeling,
Elsevier, vol. 33(4), pages 552-567, July.
- G. Menzies & R. Bird & P. Dixon & M. Rimmer, 2010. "The Economic Costs of US Stock Mispricing," Centre of Policy Studies/IMPACT Centre Working Papers g-204, Victoria University, Centre of Policy Studies/IMPACT Centre.
- Leeth, John D & Ruser, John, 2003. " Compensating Wage Differentials for Fatal and Nonfatal Injury Risk by Gender and Race," Journal of Risk and Uncertainty, Springer, vol. 27(3), pages 257-77, December.
- Dixon, Peter B. & Parmenter, B.R., 1996. "Computable general equilibrium modelling for policy analysis and forecasting," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 1, pages 3-85 Elsevier.
- repec:reg:rpubli:134 is not listed on IDEAS
- Lars Hultkrantz & Christina Olsson, 1997. "Chernobyl effects on domestic and inbound tourism in Sweden — A time series analysis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(2), pages 239-258, March.
- James Andrew Giesecke, 2011.
"Development of a Large-scale Single US Region CGE Model using IMPLAN Data: A Los Angeles County Example with a Productivity Shock Application,"
Spatial Economic Analysis,
Taylor & Francis Journals, vol. 6(3), pages 331-350, April.
- James A. Giesecke, 2009. "Development of a large-scale single U.S. region CGE model using IMPLAN data: A Los Angeles County example with a productivity shock application," Centre of Policy Studies/IMPACT Centre Working Papers g-187, Victoria University, Centre of Policy Studies/IMPACT Centre.
- Qisheng Pan & Harry Richardson & Peter Gordon & James Moore, 2009. "The Economic Impacts of a Terrorist Attack on the Downtown Los Angeles Financial District," Spatial Economic Analysis, Taylor & Francis Journals, vol. 4(2), pages 213-239.
- Bostedt, Goran, 2001. "Reindeer husbandry, the Swedish market for reindeer meat, and the Chernobyl effects," Agricultural Economics, Blackwell, vol. 26(3), pages 217-226, December.
- Ihlanfeldt, Keith R. & Taylor, Laura O., 2004. "Externality effects of small-scale hazardous waste sites: evidence from urban commercial property markets," Journal of Environmental Economics and Management, Elsevier, vol. 47(1), pages 117-139, January.
- Hans M. Amman & David A. Kendrick, . "Computational Economics," Online economics textbooks, SUNY-Oswego, Department of Economics, number comp1.
- Lucas W. Davis, 2004. "The Effect of Health Risk on Housing Values: Evidence from a Cancer Cluster," American Economic Review, American Economic Association, vol. 94(5), pages 1693-1704, December.
- George Verikios & Maura Sullivan & Pane Stojanovski & James Giesecke & Gordon Woo, 2011. "The Global Economic Effects of Pandemic Influenza," Centre of Policy Studies/IMPACT Centre Working Papers g-224, Victoria University, Centre of Policy Studies/IMPACT Centre.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Horridge).
If references are entirely missing, you can add them using this form.