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Minimizing production loss consequent to disasters using a subsidy optimization model: a pandemic case

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  • Selerio, Egberto
  • Maglasang, Renan

Abstract

Proportional allocation of subsidies is an inadequate approach in facilitating the recovery of economic sectors from disasters. It treats the sectors in isolation which inaccurately represents an interdependent macroeconomic system. The Inoperability Input-Output Model (IIM) is a disaster impact analysis model that considers the interdependency of economic sectors in measuring the impact of disasters. Although it can be exploited for Government subsidy allocation, no attempt has yet been made for such in view of optimization. Testing this model against the conventional method is also not yet explored. A proposed Subsidy Optimization Model (SOM) is developed in this study to address these gaps. The SOM is tested in the Philippines during the COVID-19 pandemic. Sensitivity and comparative scenario analysis are employed and policy implications are determined. Results show that the SOM's allocation scheme is superior to conventional, linear approaches. When subsidy budget is relatively low, prioritizing small sectors yields minimum production loss in the Philippines.

Suggested Citation

  • Selerio, Egberto & Maglasang, Renan, 2021. "Minimizing production loss consequent to disasters using a subsidy optimization model: a pandemic case," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 112-124.
    • Handle: RePEc:eee:streco:v:58:y:2021:i:c:p:112-124
    DOI: 10.1016/j.strueco.2021.05.002
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    3. A. O. Baranov & A. V. Goreev, 2022. "Analysis of the Multiplier Effects Produced by Investment in a Dynamic Input–Output Model," Studies on Russian Economic Development, Springer, vol. 33(6), pages 687-696, December.

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