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Are CGE models reliable for disaster impact analyses?

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  • Lei Zhou
  • Zhenhua Chen

Abstract

This study investigates a fundamental issue of computable general equilibrium (CGE) modeling: are CGE models reliable for measuring the economic consequence analysis of disasters? We assess the outputs of CGE analyses after controlling for various modeling factors such as data, type of model, and modeling mechanisms via a meta-analysis of 253 CGE simulations in 57 empirical studies. Our study arrives at three major findings. First, we confirm that resilience significantly reduces business disruptions from disasters. Second, results using either real-world or hypothetical data tend to vary substantially by hazard type. Third, results are quite sensitive to model assumptions and modeling structure. Overall, we suggest that future impact assessments of disasters should be conducted more cautiously in terms of adopting appropriate data, models, and shock scenarios, in order to improve the validity of CGE modeling outcomes.

Suggested Citation

  • Lei Zhou & Zhenhua Chen, 2021. "Are CGE models reliable for disaster impact analyses?," Economic Systems Research, Taylor & Francis Journals, vol. 33(1), pages 20-46, January.
    • Handle: RePEc:taf:ecsysr:v:33:y:2021:i:1:p:20-46
    DOI: 10.1080/09535314.2020.1780566
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    Cited by:

    1. Adam Rose, 2022. "Behavioral Economic Consequences of Disasters: A Basis for Inclusion in Benefit–Cost Analysis," Economics of Disasters and Climate Change, Springer, vol. 6(2), pages 213-233, July.
    2. Pradeep V. Mandapaka & Edmond Y. M. Lo, 2023. "Assessing Shock Propagation and Cascading Uncertainties Using the Input–Output Framework: Analysis of an Oil Refinery Accident in Singapore," Sustainability, MDPI, vol. 15(2), pages 1-24, January.
    3. Araujo, Inacio F. & Donaghy, Kieran P. & Haddad, Eduardo A. & Hewings, Geoffrey J.D., 2024. "Geographical Propagation of the Economic Impacts of the ISIS Conflict in Iraq," TD NEREUS 6-2024, Núcleo de Economia Regional e Urbana da Universidade de São Paulo (NEREUS).
    4. Jan Gaska, 2023. "Losses from Fluvial Floods in Poland over the 21st Century – Estimation Using the Productivity Costs Method," Economics of Disasters and Climate Change, Springer, vol. 7(3), pages 357-383, November.
    5. Davide Bazzana & Aidin Mobasser & Sergio Vergalli, 2022. "Less Water, Less Oil: Policy Response for the Kenyan Future, a CGE Analysis," Sustainability, MDPI, vol. 14(18), pages 1-26, September.

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