Abstract
Natural disasters have a negative effect on people and the regional economy. The central and regional governments have made natural disaster reduction a high priority. In this paper, we develop a dynamic spatial CGE model for evaluating the economic impacts of an earthquake on the Tokai region of Japan. Our model is characterized as a decentralized economy with utility-maximizing consumers and value-maximizing firms in a dynamic context. This model embodies both the spatial interactions among regions and the dynamics of regional investments. A simulation model is constructed of an inter-regional inter-sectoral economy in which Japan is subdivided into 47 regions. All the regions are connected by transportation networks. The model is calibrated for the regional economy in Japan.
We analyze the dynamic impacts of a disaster in the Tokai region. Two scenarios are examined. The first is useful for an ex-post economic evaluation. The second scenario shows the importance of investment in terms of protecting the regional economy in the event of a disaster, i.e., an ex-ante evaluation. Our results suggest that any disaster analysis should evaluate the economic impacts of a disaster based on both ex-ante and ex-post criteria.
JEL Classification: Q54, R13, R41
