Geoscience Reference
In-Depth Information
Fig. 16.6
Decomposition of the deviation in LA County employment (% point contributions to
total deviation)
explain all of the 2013 deviation. Returning to Fig.
16.5
, with employment sharply
below baseline in 2013, and only a small negative deviation in the population, the
regional employment rate must fall relative to baseline. As discussed in
Sect.
16.3.1
, the wage mechanism imposes sticky, but not fixed, nominal wages.
With the 2013 employment rate below baseline, the sticky wage mechanism
generates a negative deviation in the 2013 nominal wage (Fig.
16.5
).
Figure
16.8
presents our GDP decomposition. In 2013, GDP is projected to be
0.08 % below baseline. Much of this decline is due to the negative deviation in 2013
employment, which, as discussed above, is largely due to the willingness-to-pay-
induced reduction in the terms of trade. However, productivity loss, particularly via
BI, also makes a substantial negative contribution to the 2013 GDP deviation
(
0.03 %).
Turning to the post-event phase, we begin with Figs.
16.4
and
16.9
. The negative
deviation in 2013 investment (Fig.
16.4
) is expressed in 2014 as a negative capital
deviation (Fig.
16.9
). From 2014 onwards, the magnitude of the negative invest-
ment deviation attenuates, eventually returning to baseline by the simulation's end.
This reflects the gradual return of the investor risk premium to baseline (recall
Fig.
16.2
). However, the investment deviation lies below the capital deviation up to
2020, and, as a result, the negative capital deviation continues to grow to that year.
Thereafter, as investment steadily returns to baseline, the negative capital deviation
gradually attenuates.
In 2013, population falls slightly due to event-related fatalities (Fig.
16.5
). In
2014,
the regional population deviation reaches its lowest point (
0.17 %),
