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Indirect Losses from Natural Disasters: Measurement and Myth

In: Modeling Spatial and Economic Impacts of Disasters

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  • Harold C. Cochrane

    (Colorado State University)

Abstract

Early studies of indirect loss framed the problem narrowly and focused on secondary ripple effects triggered by supply bottlenecks, i. e., the shortages that cause undamaged producers and service providers to shut down (Cochrane, 1974). Since then, the concept has been refined and the analytical tools for estimating such losses have advanced markedly (RMS, 1996; Rose et al., 1995). Yet despite such advancements, indirect loss remains a somewhat amorphous concept. In contrast to what was once believed, it does not readily yield simple rules of thumb, e. g., “indirect loss is equivalent in magnitude to direct loss.” In fact, it has since been learned that indirect loss can vary dramatically, and under some circumstances may even prove to be negative implying regional net gains (negative losses). This Chapter provides: a conceptual framework for analyzing indirect loss, a brief description of an algorithm for calculating such loss, a discussion of the range of post disaster outcomes that might be expected, and a brief review of the evidence. These elements are then used to evaluate claims various agencies have made regarding the economic fallout from the World Trade Center attack.

Suggested Citation

  • Harold C. Cochrane, 2004. "Indirect Losses from Natural Disasters: Measurement and Myth," Advances in Spatial Science, in: Yasuhide Okuyama & Stephanie E. Chang (ed.), Modeling Spatial and Economic Impacts of Disasters, chapter 3, pages 37-52, Springer.
  • Handle: RePEc:spr:adspcp:978-3-540-24787-6_3
    DOI: 10.1007/978-3-540-24787-6_3
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    Cited by:

    1. Diana De Alwis & Ilan Noy, 2019. "Sri Lankan households a decade after the Indian Ocean tsunami," Review of Development Economics, Wiley Blackwell, vol. 23(2), pages 1000-1026, May.
    2. Kelly D. Edmiston, 2017. "Financial Vulnerability and Personal Finance Outcomes of Natural Disasters," Research Working Paper RWP 17-9, Federal Reserve Bank of Kansas City.
    3. Boisvert, Richard N. & Kay, David & Turvey, Calum G., 2012. "Macroeconomic costs to large scale disruptions of food production: The case of foot- and-mouth disease in the United States," Economic Modelling, Elsevier, vol. 29(5), pages 1921-1930.
    4. Albert E. Steenge & Marija Boèkarjova, 2005. "Thinking about Big Floods in a Small Country - Dutch Modelling Exercises," ERSA conference papers ersa05p314, European Regional Science Association.
    5. H. Lin & Y. Kuo & D. Shaw & M. Chang & T. Kao, 2012. "Regional economic impact analysis of earthquakes in northern Taiwan and its implications for disaster reduction policies," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 61(2), pages 603-620, March.
    6. 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.
    7. Iman Rahimi Aloughareh & Mohsen Ghafory Ashtiany & Kiarash Nasserasadi, 2016. "An Integrated Methodology For Regional Macroeconomic Loss Estimation Of Earthquake: A Case Study Of Tehran," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-24, September.
    8. 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.
    9. Christin Hoffmann & Gunter Stephan, 2018. "Regional Flood Impacts And Adaptation In A Federal Setting: A Spatial Computable General Equilibrium Analysis For Switzerland," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 1-36, May.
    10. Diana De Alwis & Ilan Noy, 2019. "Sri Lankan households a decade after the Indian Ocean tsunami," Review of Development Economics, Wiley Blackwell, vol. 23(2), pages 1000-1026, May.
    11. Jonkman, S.N. & Bockarjova, M. & Kok, M. & Bernardini, P., 2008. "Integrated hydrodynamic and economic modelling of flood damage in the Netherlands," Ecological Economics, Elsevier, vol. 66(1), pages 77-90, May.

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