The Long Shadow of a Major Disaster: Modeled Dynamic Impacts of the Hypothetical HayWired Earthquake on California’s Economy

Ian Sue Wing, Adam Rose, Dan Wei and Anne Wein

International Regional Science Review, 2024, vol. 47, issue 5-6, 655-696

Abstract: We develop and apply a dynamic economic simulation model to analyze the multi-regional impacts of, and mechanisms of recovery from, a major disaster, the HayWired scenario — a hypothetical Magnitude 7.0 earthquake affecting California’s San Francisco Bay Area. The model integrates loss pathways: capital stock damage, labor supply shocks due to short-term population displacement and longer-run out-migration from damaged areas, and the exacerbating effects of damage to transportation infrastructure capital, as well as various aspects of static and dynamic economic resilience. With input substitution-based static inherent resilience and dynamic resilience in the form of optimal intertemporal and spatial investment allocation, gross output losses range from 0.5 percent to 6 percent across regions, and welfare losses are 0.4 percent statewide but can be ten times as large in hardest-hit areas. Large-scale reconstruction investment is supported by substantial interregional transfers of resources through intra-state trade. Increased output via firms engaging in the key adaptive resilience tactic of production recapture can alleviate a substantial fraction of losses—but only if upstream and downstream barriers to recovery can be lowered quickly.

Keywords: disaster recovery; dynamic multi-regional CGE modeling; economic resilience; HayWired earthquake scenario (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:sae:inrsre:v:47:y:2024:i:5-6:p:655-696

DOI: 10.1177/01600176231202451

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