EVALUATING THE DYNAMIC AND SPATIAL ECONOMIC IMPACTS OF AN EARTHQUAKE: A CGE APPLICATION TO JAPAN

We have developed a dynamic spatial computable general equilibrium model to investigate the regional economic impacts of an earthquake. In our spatial model, Japan is subdivided into 47 regions. All the regions are connected by transportation networks. Our model is of a decentralized economy with utility-maximizing consumers and value-maximizing firms in a dynamic context. The model embodies both the spatial commodity flows among regions and the dynamics of regional investments. The model is calibrated for the regional economy using a multi-regional input-output table for Japan. We estimate the impacts of a hypothetical earthquake, which is expected to occur in the near future, on the regional economy in a case study of the Tokai region of Japan. The results show the indirect and distributional economic impacts before and after an earthquake. This study suggests that any disaster analysis should evaluate the economic impacts of a disaster based on both ex-ante and ex-post criteria.