Geoscience Reference
In-Depth Information
results for “Right after 'all clear'” and “Twelve months”.
16
In calculating the decay
rate between years 2014 and 2016, we use results for “Twelve months” and “Thirty
six months”.
17
Similarly, in calculating the decay rate between 2016 and 2018, we
use results for “Thirty six months” and “Sixty months”. After 2018, we assume a
smooth decay rate for the behavioral shocks based on the annual average percentage
change in Table
16.1
results for “percentage who are still waiting” between the “all
clear” and “sixty months” marks.
The Fig.
16.2
pattern of response decay has been seen across several studies.
Burns and Slovic (
2007
), using findings from the risk perception literature and
expert elicitation, constructed a system dynamics simulation model to investigate
public response to a terrorist attack. The results indicated that following news of an
attack perceived risk and fear escalate rapidly, reaching a peak, and then decline
quickly before levelling off slightly above pre-attack levels. Burns et al. (
2011b
)
corroborated these simulation results by tracking public response to the attempted
attack on Northwest Flight 253. Consistent with the simulation results, fear of flying
and the intent to postpone air travel declined quickly before levelling off. Burns
et al. (
2011a
) also surveyed Americans in March and April of 2011 in response to
the triple disaster in Japan. They found fear of earthquakes, tsunamis and nuclear
accidents declined markedly even within a month of the disaster. Most recently,
Burns (
2013
) investigated public fear and perceptions of risk in reaction to the
Boston attack. They conducted three surveys from April to July 2013 and found that
public concern in July was a third of what it was in April.
The survey results do not directly elucidate the potential size of the investor risk
premium, which would require an investor survey. Giesecke et al
.
(
2012
) addressed
this by examining the literature on the asset price impacts of stigma related to
various contamination risks. They noted an average implied risk premium in the
vicinity of 20 %. This was in line with their RDD survey results for compensating
wage premium. Based on this, they assumed that the two suppliers of primary
factors (labor and capital) seek identical percentage movements in compensation.
Like the RDD survey results in Giesecke et al., the Table
16.2
chlorine results also
signal a 20 % increase in required wage compensation. Hence, we assume that firms
require the same premium to invest in 90071 in the event year, and that thereafter
the investor risk premium decays at the same rate as the wage premium (Fig.
16.2
).
We implement the increase in the risk premium in LA-DYN as increases in
industry-specific required rates of return, scaled to reflect
the share of each
industry's capital payments explained by activity in 90071.
16
For example, the 2013 deviation in willingness to pay for professional services is
15 %. Hence
the 2014 deviation is assumed to be
9/55).
17
For example, the 2015 deviation in willingness to pay for professional services is assumed to be
2.4 % (¼
15 %
1.8 % (¼
2.4 %
(5/9)^0.5).
