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

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  • Ian Sue Wing
  • Adam Rose
  • Dan Wei
  • Anne Wein

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.

Suggested Citation

  • Ian Sue Wing & Adam Rose & Dan Wei & Anne Wein, 2024. "The Long Shadow of a Major Disaster: Modeled Dynamic Impacts of the Hypothetical HayWired Earthquake on California’s Economy," International Regional Science Review, , vol. 47(5-6), pages 655-696, November.
    • Handle: RePEc:sae:inrsre:v:47:y:2024:i:5-6:p:655-696
    DOI: 10.1177/01600176231202451
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    References listed on IDEAS

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