CIP session 11: Input-Output and General Equilibrium Modelling

Question 1

Advantage macroeconomic models compared to “normal” risk models

Answer 1

An advantage is that they include economy wide indirect/output losses.

Question 2

Effects of a disaster on the economy?

Answer 2

• less production in the affected regions due to damages and evacuation
• less supply and demand to other regions due to reduced production
• additional import demand to other regions
• additional demand of affected regions for reconstruction needs

Question 3

IO models and GEM: metrics/output variables to be measured

Answer 3

GDP, GDP growth, Inflation rate, Employment

Question 4

Advantages and disadvantages of Input-Output Models

Answer 4

• The strenght is the use of multipliers; how production changes in one sector can also influence other sectors since they are connected.
• A disadvantage is that it is a linear model and there is no limit to production capacity. Another disadvantage is that it is demand-driven.

Question 5

What can the Leontief Inverse be used for?

Answer 5

To asses the changes in final demand. The sum of each column of the Leontief inverse is the multiplier effect. When sectors are connected can see a spillover effect.

Question 6

What is the function of the Computable Equilibrum Model? (and agent behaviour)

Answer 6

It is an optimizing model; so after a shock the model tries to optimize the economy. There is a set of economic agents with fixed behaviour: firms try to maxmize profit and minimalize costs, households try to maximize utility

Question 7

What is an advantage and disadvantage of the Computable Equilibrum Model?

Answer 7

• Advantage is that it allows for non-linearity, so it allows for substitution between goods.
• A disadvantage is that they are black box models.

Question 8

What should macro-economic models be capable of for disaster risk modeling?

Answer 8

• they should be able to represent the economic system with all the actors as detailed as possible
• they should incorporate a time dimension
• they should incorporate a spatial dimension

Question 9

Name IO-based impact models

Answer 9

-IIM
- ARIO (Hyrbid IO/GCE)

Question 10

What are the biggest unknowns in models? (GCE and IO)

Answer 10

• Initial disruption from direct to indirect
• recovery path
• validation (which model is the best match with the real situation)