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respect to overall economic activity levels, rather than the explicit movement of
individual businesses. For example, Gordon et al. (
2005
) use a multi-regional input-
output modeling approach with inter-regional trade flows. They divide the greater
LA area into sub-regions, such that impacts do have spatial delineation. However,
there is no explicit attention to the relocation of firms.
16.6.2 Spatial Analysis Framework
Various adjustments in economic models have been offered in relation to the
relocation of businesses. For example, Isard and Kuenne (
1953
) provided various
ad hoc adjustments to reflect an agglomeration effect associated with the entrance
of a new steel mill into a region. Adjustments referred to the likelihood that support
industries would develop in the area, thereby increasing the basic multiplier effects.
Our analysis deals with the opposite situation, i.e., business exit. Hence, further
adjustment of general equilibrium supply-chain linkages might be in order, partic-
ularly to the extent that the model's endogenous capital supply responses under-
state the magnitude of these effects.
Another complication is that relocation may not be entirely out of the region for
which the impact analysis was performed but may also take place within the region,
as in the case of World Trade Center area firms moving to Midtown Manhattan.
Also, business activity in cyberspace and tele-commuting have increased signifi-
cantly in recent years, further blurring boundaries. Finally, we have the
longstanding issue of the ready ability to shift economic activity among branch
plants of the same company. Given all these considerations, a quarantine plus
geographic averting behavior may not result in losses as great as initially predicted.
Below we discuss in detail various aspects of the potential spatial realignment of
economic activity in relation to the chlorine attack scenario:
Business Relocation Alternatives
First we must consider relocation out of the
financial district. This would potentially include: (1) actual physical relocation;
(2) a shift of activity to other branches of the firm; and/or (3) work primarily in
cyberspace.
Physical relocation is likely to approach zero in a case where quarantine/
decontamination lasts only a few days. Shift of activity to branch offices is a
possibility, especially for firms involved in banking, finance and insurance. How-
ever, we lack data on the extent of this opportunity and the extent to which
businesses will exploit it. Work in cyber space, including tele-commuting, deserves
special attention here because it is becoming more prevalent, especially in the
banking and finance sectors that are predominant in the area affected by the chlorine
attack. This activity may not be affected in any significant way by the attack.
Increasingly, businesses are backing-up their systems such that even if main
computers are located in the financial district, relevant files can be accessed from
elsewhere. Similarly, data are being increasingly stored on various types of “cloud.”
