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Using a regional CGE model for rapid assessments of the economic implications of terrorism events: creating GRAD-ECAT (Generalized, Regional And Dynamic Economic Consequence Analysis Tool)

Author

Listed:
  • Peter B. Dixon
  • Michael Jerie
  • Maureen T. Rimmer
  • Glyn Wittwer

Abstract

The Terrorism Risk Assessment (TRA) groups in the Department of Homeland Security assess millions of terrorism scenarios defined by location, agent (e.g. nuclear device), and delivery method (e.g. car bomb). For each scenario they estimate deaths, injuries, property damage, clean-up and health expenses, visitor discouragement, and other damage dimensions. The TRA groups translate damages into economic measures, e.g. loss of GDP. Previously they used an input-output (I-O) model. Here we replace I-O with computable general equilibrium (CGE). Solving CGE models is computationally time-consuming and requires specialist skills. For the TRA groups this creates two challenges: feasibility and security. A model that cannot be solved in less than a fraction of a second is infeasible for analyzing millions of scenarios. The TRAs can rely only on people with high security clearances, limiting the possibilities for obtaining specialist advice. Our approach to these challenges was to use a CGE model to estimate elasticities that show the sensitivity of economic variables to direct damage effects of events occurring in different regions. For example, we supplied the TRA groups with CGE-based estimates of the percentage effect on national welfare of destruction of 1 per cent of the capital stock in congressional district NY14. Our elasticity approach meets both challenges. First, for any given terrorism scenario specified by a location and a vector of direct damage shocks, the TRA groups can use the elasticities in linear equations to estimate in nanoseconds the implications for a wide range of economic variables. Second, as outside contractors, we have no need for access to sensitive information on specific shock vectors and target regions. We describe how we used a dynamic, multi-regional CGE model, USAGE-TERM, to estimate the elasticities.

Suggested Citation

  • Peter B. Dixon & Michael Jerie & Maureen T. Rimmer & Glyn Wittwer, 2017. "Using a regional CGE model for rapid assessments of the economic implications of terrorism events: creating GRAD-ECAT (Generalized, Regional And Dynamic Economic Consequence Analysis Tool)," Centre of Policy Studies/IMPACT Centre Working Papers g-280, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:g-280
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    References listed on IDEAS

    as
    1. Dixon, Peter B. & Rimmer, Maureen T., 2011. "You can't have a CGE recession without excess capacity," Economic Modelling, Elsevier, vol. 28(1-2), pages 602-613, January.
    2. K. Fox, Alan & Powers, William, 2008. "Textile and Apparel Barriers and Rules of Origin: What’s Left to Gain after the Agreement on Textiles and Clothing?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 656-684.
    3. Peter B. Dixon & Bumsoo Lee & Todd Muehlenbeck & Maureen T. Rimmer & Adam Z. Rose & George Verikios, 2010. "Effects on the U.S. of an H1N1 epidemic: analysis with a quarterly CGE model," Centre of Policy Studies/IMPACT Centre Working Papers g-202, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. Peter B. Dixon & Maureen T. Rimmer & Bryan W. Roberts, 2014. "Restricting Employment Of Low-Paid Immigrants: A General Equilibrium Assessment Of The Social Welfare Implications For Legal U.S. Wage-Earners," Contemporary Economic Policy, Western Economic Association International, vol. 32(3), pages 639-652, July.
    5. Steven Zahniser & Tom Hertz & Peter Dixon & Maureen Rimmer, 2012. "Immigration Policy and its Possible Effects on U.S. Agriculture and the Market for Hired Farm Labor: A Simulation Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 477-482.
    6. 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.
    7. J. A. Giesecke & W. J. Burns & A. Barrett & E. Bayrak & A. Rose & P. Slovic & M. Suher, 2012. "Assessment of the Regional Economic Impacts of Catastrophic Events: CGE Analysis of Resource Loss and Behavioral Effects of an RDD Attack Scenario," Risk Analysis, John Wiley & Sons, vol. 32(4), pages 583-600, April.
    8. Peter B. Dixon & Maureen T. Rimmer, 2004. "The US Economy from 1992 to 1998: Results from a Detailed CGE Model," The Economic Record, The Economic Society of Australia, vol. 80(s1), pages 13-23, September.
    9. P. B. Dixon & J. A. Giesecke & M. T. Rimmer & A. Rose, 2011. "The Economic Costs To The U.S. Of Closing Its Borders: A Computable General Equilibrium Analysis," Defence and Peace Economics, Taylor & Francis Journals, vol. 22(1), pages 85-97.
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    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F52 - International Economics - - International Relations, National Security, and International Political Economy - - - National Security; Economic Nationalism
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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