IDRC, Davos, 2012      Indirect Economic Impacts of the Great East          Japan Earthquake: Approach by Spatial         ...
Economic Loss Estimation       Production Level                            Disaster                                       ...
Objectives   To establish the integrated economic estimation    loss method        to reflect the induced damage caused ...
Process of the Impacts                    Natural Disaster       Damages to       Capitals, Labor and       Infrastructure...
(S)CGE: (Spatial) Computable General EquilibriumModel (household-industry model)                                          ...
Example of Production Structure                              Production Output         y αf ( x1 ,..., xn )               ...
Key Assumptions   Elasticity of Substitutions among regions:    Intermediate goods: 0.15-0.80 (Koike et al., 2011)    Fin...
Classification of Sectors         1   Agri ture, Forestry and Fi                 cul                       shery         2...
Economic Losses in households (EquivalentVariation: forgone opportunity of consumption)                                   ...
Total Losses (EV + Supplier Surplus)       Million Yen          0                      -2000000                      -4000...
Characteristics of Production Decrease                              Chugoku       Shikoku Kyusyu                          ...
Kanto (Indirect)           Kinki Chugoku Shikoku   Hokkaido                  4% Kanto              0%     0%      0% Kyusy...
Index of Industrial Production (March/Feb)1.2 10.80.60.40.2 0      Hokkaido Tohoku   Kanto   Chubu   Kinki   Chugoku Shiko...
10.80.6                                                Food0.4                                             Metal          ...
Loss Distribution in Tohoku1.2 10.80.6                                 Food0.4                                 Metal      ...
10% more shock in Kanto Region1.2 10.80.6                                                  Food                           ...
Conclusions    An integrated economic estimation loss method is     proposed.    It basically agrees with the economic i...
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Measuring industrial production capacity caking account of malfunctions of production capital and lifeline systems disruptions caused by the Great East Japan Earthquake and Tsunami of 11 March, 2011

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Hirokazu TATANO1, Yoshio KAJITANI2

1Disaster Prevention Research Institute, Kyoto University, Japan; 2Disaster Prevention Research Institute, Kyoto University, Japan

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Measuring industrial production capacity caking account of malfunctions of production capital and lifeline systems disruptions caused by the Great East Japan Earthquake and Tsunami of 11 March, 2011

  1. 1. IDRC, Davos, 2012 Indirect Economic Impacts of the Great East Japan Earthquake: Approach by Spatial Computable General Equilibrium Model Yoshio Kajitani and Hirokazu Tatano 1 Disaster Prevention Research Institute Kyoto University
  2. 2. Economic Loss Estimation Production Level Disaster Time Lifeline Disruptions, Capital and Labor Losses Supply-Chain Impacts, etc.2 Disaster Prevention Reasearch Institute Kyoto University
  3. 3. Objectives To establish the integrated economic estimation loss method  to reflect the induced damage caused by the supply chain disruption as well as the direct damage (capacity loss) caused by the reduction of production capacity due to facility damage and lifelines disruptions. To conduct economic loss estimation for the case of the Great East Japan Earthquake and Tsunami  to investigate major factors of economic impact of the event 3 and loss distribution amongKyoto University sectors. areas and Disaster Prevention Reasearch Institute
  4. 4. Process of the Impacts Natural Disaster Damages to Capitals, Labor and Infrastructures Production Capacity Losses Damages to Production Changes Household IO, CGE model Supply Chain Impacts, Demand Changes, Trade Pattern Changes (Price Changes)4 Disaster Prevention Reasearch Institute Kyoto University
  5. 5. (S)CGE: (Spatial) Computable General EquilibriumModel (household-industry model) .... Region A Region C Region B Household Househol Transportation d Cost input Goods Goods Labor Market Market Market Firms Firms Imports Exports Export Import5 Disaster Prevention Reasearch Institute Kyoto University
  6. 6. Example of Production Structure Production Output y αf ( x1 ,..., xn ) Leontieff Value Added Composite Intermediates CES CES ( d ) 0.15-0.80 Land Labor Capital Domestic Goods CES ( e) Imported Goods from different countriesintegrated as capital Countries are not considered (one foreign imports) 6 Disaster Prevention Reasearch Institute Kyoto University
  7. 7. Key Assumptions Elasticity of Substitutions among regions: Intermediate goods: 0.15-0.80 (Koike et al., 2011) Final goods: 2.0 Income of household: No changes before and after the disaster Firm retains their losses and transferred to stock holders Goods and Services: Price can be changed (Increase for scarcity goods) Foreign imports (no price change/ import ratio is same as before disaster) Damage Ratio: Capacity Losses in a previous presentation 7 Disaster Prevention Reasearch Institute Kyoto University
  8. 8. Classification of Sectors 1 Agri ture, Forestry and Fi cul shery 2 M i ng ni 3 Food 4 M etal 5 M achi nery 6 O ther M anufacturi ng 7 B uidi and M ai l ng ntenance 8 Publc C onstructi i on 9 O ther C onstructions 10 Electri ty, W ater, G as, H eat Suppl ci y 11 Retai and W hol e l esal 12 O thers 13 Transportati on
  9. 9. Economic Losses in households (EquivalentVariation: forgone opportunity of consumption) EV 0 Million Yen -2000000 -4000000 -6000000 -8000000 -10000000 -12000000 Tohoku -14000000 9 Disaster Prevention Reasearch Institute Kyoto University
  10. 10. Total Losses (EV + Supplier Surplus) Million Yen 0 -2000000 -4000000 -6000000 -8000000 -10000000 -12000000 Tohoku -14000000 About 36 trillion yen=45 billion dollars/year 3.75 billion dollars/month10 Disaster Prevention Reasearch Institute Kyoto University
  11. 11. Characteristics of Production Decrease Chugoku Shikoku Kyusyu 4% Kinki 0% Hokkaido 1% Tohoku 0% Chubu 3% (Indirect) Induced loss=32% Kanto 4% 9% (Indirect) 11% Kanto (Direct/Capacity Tohoku Loss)Direct loss 14% (Direct/Capacity Loss)(Production 54%capacityloss)=68% Induced Economic Loss /Production Capacity Loss =1/2 Metal Production Sector 11 Disaster Prevention Reasearch Institute Kyoto University
  12. 12. Kanto (Indirect) Kinki Chugoku Shikoku Hokkaido 4% Kanto 0% 0% 0% Kyusyu 0% (Direct/Capacity Chubu 0% Tohoku Loss) 2% (Indirect) Induced loss=15% 8% 9% Direct loss Tohoku (Production (Direct/Capacity capacity Loss) loss)=85% 77%Induced Economic Loss/Production CapacityLoss Machinery Sector=1/12 12 Disaster Prevention Reasearch Institute Kyoto University
  13. 13. Index of Industrial Production (March/Feb)1.2 10.80.60.40.2 0 Hokkaido Tohoku Kanto Chubu Kinki Chugoku Shikoku Kyusyu
  14. 14. 10.80.6 Food0.4 Metal Machinery0.2 0 (Effects of Brownout is not considered)
  15. 15. Loss Distribution in Tohoku1.2 10.80.6 Food0.4 Metal Machinery0.2 0
  16. 16. 10% more shock in Kanto Region1.2 10.80.6 Food Metal0.4 Machinery0.2 016 Disaster Prevention Research Institute Kyoto University
  17. 17. Conclusions An integrated economic estimation loss method is proposed. It basically agrees with the economic indicators after the events. In the case of the Great East Japan Earthquake and Tsunami, about 80% of economic loss is due to production capacity loss including facility damage and lifeline disruption, and the 20% is due to induced loss, e.g., supply chain disruption in March 2011. To fit the result of the model to observed data(IIP), about additional 10% loss of production capacity in “Kanto” region. This could support the opinion the brown out after the quake caused about 10% production capacity loss in the region. 17 Disaster Prevention Reasearch Institute Kyoto University

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