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National Land Structure and Disaster Vulnerability. (This is the first result and your comments are highly appreciated). Ryoji ISHII & Daisuke FUKUDA TSU, Tokyo Institute of Technology. Geotectonic lines. Background.

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national land structure and disaster vulnerability

National Land Structure and Disaster Vulnerability

(This is the first result and your comments are highly appreciated)

Ryoji ISHII & Daisuke FUKUDA

TSU, Tokyo Institute of Technology

Geotectonic lines

background
Background

National land structure (i.epopulation distribution) and disaster risk

Japan faces the higher risk of natural disasters

Tokyo metropolitan area

  • 3.6% of the land area
  • 27.5% of the population
  • 31.9% of GDP

Trade-off

Centralized national land structure may lead to higher disaster vulnerability

Centralized national land structure improves productivity (economics of agglomeration)

Examine the relationship between the disaster vulnerability and the national land structure (to be centralized? or de-centralized?)

background1
Background

Characteristics of the natural disaster

  • Direct impacts
    • Capital losses, human losses
  • Spatially-indirect impacts
    • Decrease in production due to the suspension of providing intermediate goods in other regions
  • Temporally-indirect impacts
    • Lower productivity continues for a while until the full restoration

“Disaster vulnerability”

Necessary to model how the impact spread across regions over time when a disaster occurs.

Necessary to model stochastic property of the disaster.

The natural disaster is stochastic event.

concept of economic resilience
Concept of “Economic Resilience”

GDP or

Social welfare

Disaster

[Source] Ron Martin (2010) “Regional economic resilience, hysteresis and recessionary Shocks,” Journal of Economic Geography.

objective
Objective

To develop the stochastic dynamic multi-regional macroeconomic model to analyze the fundamental relationship between national land structure and disaster vulnerability

※National land structure is defined by …

  • Population distribution (Total population is fixed)
  • Disaster risk
  • Topological relationship of regions

Exogenously given

and

Fixed in the model

Ex. three regions

60% of population

33% of

population

33%

33%

20%

20%

Decentralized

Centralized

modelling methodology dsge based approach
Modelling methodology: DSGE-based approach
  • DSGE = Dynamic Stochastic General Equilibrium
    • Macroeconomic (i.e. dynamic) model with microeconomic foundations
    • Consider “stochastic shocks” on productivity
      • Ex: RBC (Real Business Cycle) model by Kydland& Prescott (1982)
    • Many extensions and applications(e.g. textbooks by Heer et al. (2009); Den Haan et al. (2011))
  • Application in disaster analysis
    • Barro (2006, QJE): non-gaussian shocks of rare disaster
    • Schmitt-Grohé& Uribe (2004, JEDC); Andreasen (2012, RED): effects of rare disasters and uncertainty shocks on risk premia
    • Segi et al. (2011, JSCE): risk-sharing rule of disaster in multi-regional economy
    • Our study: “vulnerability” analysis within multi-regional DSGE framework.
multi regional economic system at time step
Multi-regional Economic system at time-step

Time

Other Regions

Time

Region

Time

Capital

Capital

Infrastructure

Infrastructure

D

Capital

Infrastructure

Production technology

Production

technology

Population

Investment

Transfer

Investment

Goods

Consumption

Representative

household

multi regional economic system at time step1
Multi-regional Economic system at time-step

Time

Other Regions

Time

Region

Time

  • Setup
  • At the start of time , each region has its own production capital.
  • Capitals have been accumulated from the past.
  • The national economy has a common infrastructure for all regions.
  • Population of each region is fixed and does not change over time. Also, people are supposed not to change their residential regions.

Capital

Infrastructure

Population

multi regional economic system at time step2
Multi-regional Economic system at time-step

Time

Other Regions

Time

Region

Time

Capital

Infrastructure

  • A natural disaster occurs stochastically before the regions conduct their production activities.
  • Damages from the natural disaster is defined as a ε% reduction of production capital in the affected region and of the infrastructure, respectively.

D

Natural disaster

Capital

Infrastructure

Population

multi regional economic system at time step3
Multi-regional Economic system at time-step

Time

Other Regions

Time

Region

Time

Capital

Infrastructure

  • Each region produces goods by using their own production capital, local labor, and the infrastructure.

D

Production technology

Capital

Infrastructure

Production technology

Production

technology

Population

Goods

multi regional economic system at time step4
Multi-regional Economic system at time-step

Time

Other Regions

Time

Region

Time

Capital

Infrastructure

  • A single homogenous good is used for the consumption and the investment.
  • Goods are transferred freely across regions (i.e. no transport cost).

D

Goods market

Capital

Infrastructure

Production technology

Production

technology

Population

Investment

Transfer

Investment

Goods

Consumption

multi regional economic system at time step5
Multi-regional Economic system at time-step

Time

Other Regions

Time

Region

Time

Capital

Infrastructure

  • Representative households incur utility according to their consumption level.

D

Representative household

Capital

Infrastructure

Production technology

Production

technology

Population

Investment

Transfer

Investment

Goods

Consumption

Representative

household

multi regional economic system at time step6
Multi-regional Economic system at time-step

Time

Other Regions

Time

Region

Time

Capital

Capital

Infrastructure

Infrastructure

  • Capital stock and infrastructure are accumulated by investment.
  • But, adjustment costs are required for investment. They are defined as a function of capital stock and investment.

D

Capital accumulation

Capital

Infrastructure

Production technology

Production

technology

Population

Investment

Transfer

Investment

Goods

Consumption

Representative

household

dynamical economic system
Dynamical economic system
  • The social welfare is given by the linear sum of the utilities of all regions (i.e. Benthamite-type social welfare function).
  • The social planner determine the sequence of control variables to maximize the objective function.
  • The objective function is the expected present value of the social welfare for all time horizons.

Economic system at time

Instantaneous

social welfare

Sequence of control variables:

Economic system at time

Instantaneous social welfare

dynamical economic system1
Dynamical economic system
  • The social planner’s problem

Economic system at time

Instantaneous

social welfare

Balance of goods flow

Capital accumulation

Economic system at time

Natural disaster

Instantaneous social welfare

quantifying disaster vulnerability
Quantifying disaster vulnerability

Consumption

  • Steady state
    • The condition that capital does not change between time t and t+1 and disaster doesn’t occur while that.

Natural disaster

Steady state

  • Restoration path
    • the dynamic process returning to the original steady state after the disaster

Capital

Social welfare

  • Disaster vulnerability
    • Spatial and temporal widespread impact of the natural disaster
  • The area surrounded by the restoration curve and the social welfare at the steady state.

Disaster vulnerability

Disaster happens

Time

results of numerical simulations
Results of Numerical Simulations

Parameters

  • National land structure (exogenously changed)
    • Population distribution
    • Disaster risks fixed
    • Topological relationship
  • Infrastructure (its usability varies with topology)

Same risk level

High risk

Low risk

Case.1

Case.2

All the regions have the same likelihood of disaster and the equivalent capital-loss ratio.

Asymmetric risk level across regions.

Case.3

Linear arrangement

Circular arrangement

Effects of network topology

results case 1 two regions
Results: Case.1 (two regions)

The same disaster risk in all regions

  • To avoid catastrophic impact, decentralized national land structure might be desirable.

50%

Same risk level

All the regions have the same likelihood of disaster and ratio of capital loss

Maximum value

of vulnerability

  • At the 50% population share of Region 1, the nation has the highest social welfare.

Decentralization would have the effects of reducing disaster vulnerability.

50%

A disaster in Region 1

Region 1

Region 2

A disaster in Region 2

results case 2 two regions
Results: Case.2(two regions)

Asymmetry in disaster risk level

across regions

41%

Low risk

High risk

Region 2 has the lower disaster risk.

  • At the 41% of population share of Region 1, the nation has the highest social welfare.
  • To avoid catastrophic impact, on the other hand, 20% of population share of Region 1 is optimal (least vulnerability).

Desirable national land structure in terms of maximizing social welfare or avoiding disaster vulnerability are different.

20%

A disaster in Region 1

Region 1

Region 2

A disaster in Region 2

results case 3 three regions
Results: Case.3 (three regions)

Difference in topological relationship of regions

Circular arrangement

Linear arrangement

Region 1

Region 2

Region 1

Region 3

Region 2

Region 3

  • In both arrangements, decentralized national land structure is desirable.
  • The disaster vulnerability per welfare in the linear arrangement is higher than that in the circular arrangement.

If the accessibility to the infrastructure is low, national land structure might have a high disaster vulnerability.

conclusion
Conclusion

Current findings

  • Consideration of
    • inter-regional trade, multiple goods cases, population mobility, agglomeration economy …
    • Reconsideration of “vulnerability” concept within economic framework
  • The centralized national land structure would have high disaster vulnerability than decentralized one.
  • In the case of asymmetric disaster-risk level across regions, the desirable national land structure either in terms of social welfare or disaster vulnerability might be different.
  • Infrastructure would have the effect of equalizing the disaster vulnerability across regions.
  • If there is the difference in the usability to the common infrastructure , the disaster vulnerability might increase (i.e. topological effects).

Lots of works to do!