Assessment of the Regional Economic Impacts of Catastrophic Events: CGE analysis of resource loss and behavioral effects of a RDD attack scenario
Using 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.
|Date of creation:||Jan 2010|
|Date of revision:|
|Publication status:||Published in Risk Analysis, Vol. 32(4), April 2012, pp. 583-600.|
|Contact details of provider:|| Postal: |
Phone: 03 9919 1877
Web page: http://www.copsmodels.com/about.htm
More information through EDIRC
References listed on IDEAS
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.:
- Bostedt, Goran, 2001. "Reindeer husbandry, the Swedish market for reindeer meat, and the Chernobyl effects," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 26(3), December.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cop:wpaper:g-194. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Horridge)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.