IDEAS home Printed from https://ideas.repec.org/a/wly/riskan/v27y2007i4p1053-1064.html
   My bibliography  Save this article

Extreme Risk Analysis of Interdependent Economic and Infrastructure Sectors

Author

Listed:
  • Chenyang Lian
  • Joost R. Santos
  • Yacov Y. Haimes

Abstract

Willful attacks or natural disasters pose extreme risks to sectors of the economy. An extreme‐event analysis extension is proposed for the Inoperability Input‐Output Model (IIM) and the Dynamic IIM (DIIM), which are analytical methodologies for assessing the propagated consequences of initial disruptions to a set of sectors. The article discusses two major risk categories that the economy typically experiences following extreme events: (i) significant changes in consumption patterns due to lingering public fear and (ii) adjustments to the production outputs of the interdependent economic sectors that are necessary to match prevailing consumption levels during the recovery period. Probability distributions associated with changes in the consumption of directly affected sectors are generated based on trends, forecasts, and expert evidence to assess the expected losses of the economy. Analytical formulations are derived to quantify the extreme risks associated with a set of initially affected sectors. In addition, Monte Carlo simulation is used to handle the more complex calculations required for a larger set of sectors and general types of probability distributions. A two‐sector example is provided at the end of the article to illustrate the proposed extreme risk model formulations.

Suggested Citation

  • Chenyang Lian & Joost R. Santos & Yacov Y. Haimes, 2007. "Extreme Risk Analysis of Interdependent Economic and Infrastructure Sectors," Risk Analysis, John Wiley & Sons, vol. 27(4), pages 1053-1064, August.
  • Handle: RePEc:wly:riskan:v:27:y:2007:i:4:p:1053-1064
    DOI: 10.1111/j.1539-6924.2007.00943.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1539-6924.2007.00943.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1539-6924.2007.00943.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Charles Perrings, 2001. "Resilience and sustainability," Chapters, in: Henk Folmer & H. Landis Gabel & Shelby Gerking & Adam Rose (ed.), Frontiers of Environmental Economics, chapter 13, Edward Elgar Publishing.
    2. Adam Rose & Shu‐Yi Liao, 2005. "Modeling Regional Economic Resilience to Disasters: A Computable General Equilibrium Analysis of Water Service Disruptions," Journal of Regional Science, Wiley Blackwell, vol. 45(1), pages 75-112, February.
    3. Alcantara, Vicent & Padilla, Emilio, 2003. ""Key" sectors in final energy consumption: an input-output application to the Spanish case," Energy Policy, Elsevier, vol. 31(15), pages 1673-1678, December.
    4. Henk Folmer & H. Landis Gabel & Shelby Gerking & Adam Rose (ed.), 2001. "Frontiers of Environmental Economics," Books, Edward Elgar Publishing, number 1929.
    5. Han, Sang-Yong & Yoo, Seung-Hoon & Kwak, Seung-Jun, 2004. "The role of the four electric power sectors in the Korean national economy: an input-output analysis," Energy Policy, Elsevier, vol. 32(13), pages 1531-1543, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Armbruster, Ginger & Endicott-Popovsky, Barbara & Whittington, Jan, 2012. "Are we prepared for the economic risk resulting from telecom hotel disruptions?," International Journal of Critical Infrastructure Protection, Elsevier, vol. 5(2), pages 55-65.
    2. Stephanie E. Chang & Timothy McDaniels & Jana Fox & Rajan Dhariwal & Holly Longstaff, 2014. "Toward Disaster‐Resilient Cities: Characterizing Resilience of Infrastructure Systems with Expert Judgments," Risk Analysis, John Wiley & Sons, vol. 34(3), pages 416-434, March.
    3. Wenping Xu & Zongjun Wang & Liu Hong & Ligang He & Xueguang Chen, 2015. "The uncertainty recovery analysis for interdependent infrastructure systems using the dynamic inoperability input–output model," International Journal of Systems Science, Taylor & Francis Journals, vol. 46(7), pages 1299-1306, May.
    4. Qian Zhou & James H. Lambert & Christopher W. Karvetski & Jeffrey M. Keisler & Igor Linkov, 2012. "Flood Protection Diversification to Reduce Probabilities of Extreme Losses," Risk Analysis, John Wiley & Sons, vol. 32(11), pages 1873-1887, November.
    5. Kenneth G. Crowther & Yacov Y. Haimes, 2010. "Development of the multiregional inoperability input‐output model (MRIIM) for spatial explicitness in preparedness of interdependent regions," Systems Engineering, John Wiley & Sons, vol. 13(1), pages 28-46, March.
    6. Stéphane Hallegatte, 2008. "An Adaptive Regional Input‐Output Model and its Application to the Assessment of the Economic Cost of Katrina," Risk Analysis, John Wiley & Sons, vol. 28(3), pages 779-799, June.
    7. Amine El Haimar & Joost R. Santos, 2014. "Modeling Uncertainties in Workforce Disruptions from Influenza Pandemics Using Dynamic Input‐Output Analysis," Risk Analysis, John Wiley & Sons, vol. 34(3), pages 401-415, March.
    8. Kenneth G. Crowther & Yacov Y. Haimes & Gideon Taub, 2007. "Systemic Valuation of Strategic Preparedness Through Application of the Inoperability Input‐Output Model with Lessons Learned from Hurricane Katrina," Risk Analysis, John Wiley & Sons, vol. 27(5), pages 1345-1364, October.
    9. Nan, Cen & Sansavini, Giovanni, 2015. "Multilayer hybrid modeling framework for the performance assessment of interdependent critical infrastructures," International Journal of Critical Infrastructure Protection, Elsevier, vol. 10(C), pages 18-33.
    10. Muhammad Abdullah Khalid & Yousaf Ali, 2020. "Economic impact assessment of natural disaster with multi-criteria decision making for interdependent infrastructures," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(8), pages 7287-7311, December.
    11. Joanna Resurreccion & Joost R. Santos, 2012. "Multiobjective Prioritization Methodology and Decision Support System for Evaluating Inventory Enhancement Strategies for Disrupted Interdependent Sectors," Risk Analysis, John Wiley & Sons, vol. 32(10), pages 1673-1692, October.
    12. Marco Percoco, 2011. "On the Local Sensitivity Analysis of the Inoperability Input‐Output Model," Risk Analysis, John Wiley & Sons, vol. 31(7), pages 1038-1042, July.
    13. Jalal Ali & Joost R. Santos, 2015. "Modeling the Ripple Effects of IT‐Based Incidents on Interdependent Economic Systems," Systems Engineering, John Wiley & Sons, vol. 18(2), pages 146-161, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adam Rose & Gbadebo Oladosu & Shu‐Yi Liao, 2007. "Business Interruption Impacts of a Terrorist Attack on the Electric Power System of Los Angeles: Customer Resilience to a Total Blackout," Risk Analysis, John Wiley & Sons, vol. 27(3), pages 513-531, June.
    2. Joost R. Santos & Mark J. Orsi & Erik J. Bond, 2009. "Pandemic Recovery Analysis Using the Dynamic Inoperability Input‐Output Model," Risk Analysis, John Wiley & Sons, vol. 29(12), pages 1743-1758, December.
    3. Joost R. Santos, 2006. "Inoperability input‐output modeling of disruptions to interdependent economic systems," Systems Engineering, John Wiley & Sons, vol. 9(1), pages 20-34, March.
    4. Stanley, Conrad, 2020. "Living to Spend Another Day: Exploring Resilience as a New Fourth Goal of Ecological Economics," Ecological Economics, Elsevier, vol. 178(C).
    5. Huang, Yun-Hsun & Wu, Jung-Hua, 2013. "Analyzing the driving forces behind CO2 emissions and reduction strategies for energy-intensive sectors in Taiwan, 1996–2006," Energy, Elsevier, vol. 57(C), pages 402-411.
    6. Paul Raschky, 2007. "Estimating the effects of risk transfer mechanisms against floods in Europe and U.S.A.: A dynamic panel approach," Working Papers 2007-05, Faculty of Economics and Statistics, Universität Innsbruck.
    7. Masato Yamazaki & Atsushi Koike & Yoshinori Sone, 2018. "A Heuristic Approach to the Estimation of Key Parameters for a Monthly, Recursive, Dynamic CGE Model," Economics of Disasters and Climate Change, Springer, vol. 2(3), pages 283-301, October.
    8. Armbruster, Ginger & Endicott-Popovsky, Barbara & Whittington, Jan, 2012. "Are we prepared for the economic risk resulting from telecom hotel disruptions?," International Journal of Critical Infrastructure Protection, Elsevier, vol. 5(2), pages 55-65.
    9. Hannah Jona von Czettritz & Seyed-Ali Hosseini-Yekani & Johannes Schuler & Kurt-Christian Kersebaum & Peter Zander, 2023. "Adapting Cropping Patterns to Climate Change: Risk Management Effectiveness of Diversification and Irrigation in Brandenburg (Germany)," Agriculture, MDPI, vol. 13(9), pages 1-17, September.
    10. Juan C. Surís-Regueiro & José L. Santiago, 2016. "An Input-Output methodological proposal to quantifying socio economic impacts linked to supply shocks," Working Papers 1603, Universidade de Vigo, Departamento de Economía Aplicada.
    11. Dinar, Ariel, 2012. "Economy-wide implications of direct and indirect policy interventions in the water sector: lessons from recent work and future research needs," Policy Research Working Paper Series 6068, The World Bank.
    12. Aaron B. Gertz & James B. Davies & Samantha L. Black, 2019. "A CGE Framework for Modeling the Economics of Flooding and Recovery in a Major Urban Area," Risk Analysis, John Wiley & Sons, vol. 39(6), pages 1314-1341, June.
    13. Islam, Aminul & Chan, Eng-Seng & Taufiq-Yap, Yun Hin & Mondal, Md. Alam Hossain & Moniruzzaman, M. & Mridha, Moniruzzaman, 2014. "Energy security in Bangladesh perspective—An assessment and implication," Renewable and Sustainable Energy Reviews, Elsevier, vol. 32(C), pages 154-171.
    14. Tanaka, Ayumu, 2015. "The impacts of natural disasters on plants' growth: Evidence from the Great Hanshin-Awaji (Kobe) earthquake," Regional Science and Urban Economics, Elsevier, vol. 50(C), pages 31-41.
    15. Matteo Coronese & Davide Luzzati, 2022. "Economic impacts of natural hazards and complexity science: a critical review," LEM Papers Series 2022/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    16. David Nortes Martínez & Frédéric Grelot & Pauline Bremond & Stefano Farolfi & Juliette Rouchier, 2021. "Are interactions important in estimating flood damage to economic entities? The case of wine-making in France," Post-Print hal-03609616, HAL.
    17. Qin Fan & Meri Davlasheridze, 2019. "Economic Impacts Of Migration And Brain Drain After Major Catastrophe: The Case Of Hurricane Katrina," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 10(01), pages 1-21, February.
    18. Thomas Aronsson Aronsson & Thomas Jonsson & Tomas Sjögren, 2006. "Environmental Policy and Optimal Taxation in a Decentralized Economic Federation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(3), pages 437-454, September.
    19. Lixiao Zhang & Qiuhong Hu & Fan Zhang, 2014. "Input-Output Modeling for Urban Energy Consumption in Beijing: Dynamics and Comparison," PLOS ONE, Public Library of Science, vol. 9(3), pages 1-11, March.
    20. Marcus Wagner, 2004. "The Porter Hypothesis Revisited: A Literature Review of Theoretical Models and Empirical Tests," Public Economics 0407014, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:riskan:v:27:y:2007:i:4:p:1053-1064. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1539-6924 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.