Abstract
Once a massive disaster hits a regional industrial cluster, firms in the area suffer from physical damages and the in uence of the catastrophe may spread over the whole economy. Recent experiences in Mid Niigata Prefecture Earthquake in 2004, the Great East Japan Earthquake in 2011 and Kumamoto Earthquake in 2016 have impressed us with the importance of disaster prevention and mitigation again. Since 2014, the government of Japan aims to improve national resilience and plans to strengthen infrastructures such as main roads and railways. Investment for improving earthquake-resistance of transportation facilities and/or redundancy of transportation networks is effective in mitigating physical and economic damages at the time of disaster, while it also affect industrial agglomeration patterns in the long-run. In order to evaluate the effect of public investment for disaster management appropriately, it is necessary to take agglomeration economies into account. In this paper, we construct a Footloose Entrepreneur Vertical Linkage (FEVL) Model incorporating a disaster risk and examine long-run effects of transportation investment for disaster risk reduction. Furthermore, we identify the wider economic impacts, which are not treated in the conventional cost-benefit analysis, by decomposing the overall effects of transportation investments for disaster.
