EconPapers    
Economics at your fingertips  
 

Assessment of the Regional Economic Impacts of Catastrophic Events: CGE analysis of resource loss and behavioral effects of a RDD attack scenario

James Giesecke, W.J. Burns, A. Barrett, Ergin Bayrak, Adam Rose and M. Suher

Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre

Abstract: 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.

Keywords: RDD; economic impact; terrorism; risk perception (search for similar items in EconPapers)
JEL-codes: C68 D58 H56 R13 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-cmp, nep-geo and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Published in Risk Analysis, Vol. 32(4), April 2012, pp. 583-600.

Downloads: (external link)
https://www.copsmodels.com/ftp/workpapr/g-194.pdf Initial version, 2010-01 (application/pdf)
https://www.copsmodels.com/elecpapr/g-194.htm Local abstract: may link to additional material. (text/html)

Related works:
Journal Article: Assessment of the Regional Economic Impacts of Catastrophic Events: CGE Analysis of Resource Loss and Behavioral Effects of an RDD Attack Scenario (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cop:wpaper:g-194

Access Statistics for this paper

More papers in Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre Contact information at EDIRC.
Bibliographic data for series maintained by Mark Horridge ().

 
Page updated 2024-12-28
Handle: RePEc:cop:wpaper:g-194