Modeling future economic costs and interdependent industry recovery after earthquakes

Abstract

Large earthquakes cause widespread damage and can result in substantial direct and indirect economic losses. Previous researchers have proposed separate models for predicting region-wide direct and indirect losses due to future earthquakes; however, comprehensive simulation approaches that include both remain underdeveloped. In particular, the propagation of uncertainty along the various modeling steps has not been previously considered. This article addresses that gap by proposing a three-stage model to assess economic impacts of possible future earthquakes, consisting of regional ground motion simulation, damage and direct loss modeling, and macroeconomic recovery modeling. In this model, economic indicators such as direct asset losses and changes in economic sectors’ value added and employment are quantified. The model also captures uncertainty in the spatial distribution of earthquake shaking and damage patterns, which in turn is reflected in post-disaster economic indicators. The results show that considering uncertainty leads to a wide range of possible economic outcomes and high variance in direct and indirect losses. A cross-model sensitivity analysis is performed to evaluate the effect of different model parameters on the quantification of economic consequences.