Measuring Economic Impacts of Disasters: Interregional Input-Output Analysis Using Sequential Interindustry Model

The damages and losses by disasters, such as earthquakes, floods, tornadoes, and other major natural disasters, or man-made disasters, have significant and intense impacts on a region’s economy. In addition, the impacts from the damages will spread over time, and will bring serious economic effects to other regions in a long run. Furthermore, the impacts of disasters are very complex, including not only the negative effects from damages and losses, but also the positive economic effects from the recovery and reconstruction activities. Most economic models and techniques cannot confront these significant changes in a relatively short time period, since they assume incremental, and/or predictable changes in systems over time. And, the unexpected nature of these events, especially in the case of earthquakes, creates a further complication of measuring the indirect impacts (Okuyama et al., 2002). At the same time, most available data for the direct damages and losses and of the recovery processes are engineering oriented, i. e., physical damages and disruption of lifelines and their repair and restoration, and the dimension and unit of these data are quite different from the economic counterpart—very detailed and short time span in engineering data while aggregated and longer time span in economic models. Consequently, these differences pose great challenges in order to model economic impacts of disasters.