Regional Dynamics Under Adverse Physical and Behavioral Shocks: The Economic Consequences of a Chlorine Terrorist Attack in the Los Angeles Financial District - Regional Science Matters - page 336

Table 16.3 Summary comparison of real regional GDP outcomes
Impact Category

(1) Event year Direct business interruption (BI). (Output loss, $m.) $140

Direct business interruption (BI). (GDP loss, $m.) a (2) Event year $81

(3) Event year Indirect business interruption (BI). (GDP loss, $m.) $50

Other resource loss. (GDP loss, $m.) b (4) Event year $3

(5) Event year Medical expenditure & financing. (GDP loss, $m.) $1

(6) Event year Behavioral effects. (GDP loss, $m.) $311

(7) Event year Total short-run. (GDP loss, $m.) $447

Average annual long-run behavioral. (GDP loss, $m.) c

(8) Long-run $478

(9) Long-run Total ten-year behavioral. (GDP loss, $m.) $4,780

(10) NPV NPV (at 5 %) of total ten-year behavioral.

(GDP loss, $m.)

$3,622

(11) Ratio: [(2) + (3)]/(2) S-R total BI/S-R direct BI 1.62

(12) Ratio:
[(2) + (3) + (4) + (5)]/(2)

S-R ordinary loss/S-R direct BI 1.67

(13) Ratio: (8)/(2) L-R one-year/S-R direct BI 5.89

(14) Ratio: (8)/(6) L-R average behavioral/S-R behavioral 1.54

(15) Ratio: (9)/(2) Total ten-year behavioral/S-R direct BI 58.9

(16) Ratio:
(9)/[(2) + (3) + (4) + (5)]

Total ten-year behavioral/ordinary loss 35.3

a Based on a value-added/output ratio for zip code 90071 of 0.58. With BI generating lost output of
$140 m., this is equivalent to a direct GDP loss of $81.2 m ( ¼ $34 m 0.58)
b Via deaths and injuries
c

Annual average of the behavioral impacts in the ten years following the event

because the chlorine clean-up period is much shorter (3 days compared with
30 days). In the post-event phase, average annual real GDP losses from the
behavioral effects are $478 m., approximately 1.5 times the event year behavioral
loss (row 14). This ratio is approximately half that found in the RDD study. 24 This
highlights another advantage of dynamics over comparative statics. Under the long-
run comparative static closure used in Giesecke et al., regional population and
capital are assumed to fully adjust to the long-run behavioral shocks, at going
regional wage rates and rates of return. However, in the present dynamic modeling,
both regional population and capital respond slowly, not fully adjusting to the peak
behavioral effects before these shocks begin returning to baseline.

24 Giesecke et al. ( 2012 ) report an annual long-run behavioral loss of $2,628 m. and an event year
loss of $889 m., a 3:1 ratio.