Geoscience Reference
In-Depth Information
The prevalence of these cyber options warrants adjustment of direct
impact
estimates when data become available.
We must also distinguish shifts of locations
within
LA County from those going
elsewhere. As in the NYC shift to Mid-town, there are several advantages to
relocating in close proximity to the original site. Doing so would not lead to any
reduction in economic activity within LA County, all other things being equal. If we
were to apply 9/11 findings, we would estimate that 95 % of the businesses would in
fact relocate, with most of them within the County. However, the 9/11 physical
moves averaged 6-8 weeks, and thus are not pertinent to this case. If for some
reason the decontamination were to take much longer, a good deal of equipment
and material could readily be moved, since chlorine gas, unlike radiation, is not a
lingering contaminant.
Of course, business relocation does have its costs. If this significantly increases
the cost of doing business at the new location, this would have to be factored into
the analysis, and would lower the level of economic activity in LA County by
affecting its competitiveness.
Economic Activity Shift Out of the Region
This aspect does not pertain to the actual
physical movement of firms, but rather to their activity levels in place. It relates to
an increase in their cost of doing business due to increased wage demands and
increased investor rates of return to compensate for increased risk. It also relates to
their likely reduced profits as they have to provide customer discounts. These have
been addressed in our modeling approach above and also in Giesecke et al. (
2012
).
However, both of these analyses implicitly assume no business relocation, but
simply a decrease in economic activity. The modeling can be made more accurate
if an adjustment is made for those firms actually relocating elsewhere in LA County
and relocating outside the County. In the case of the later, the base for the activity
shifts decreases (fewer firms to which to apply what are essentially declines in
competiveness or product demand that lead to reduced sectoral output).
Temporal Dimension of Spatial Shifts
It is important to distinguish between busi-
ness relocation at various points in time. The implications of these decisions differ
significantly for the consequence estimates between the initial contamination,
clean-up, risk amplification, and stigma phases. While firms may not have time to
physically relocate during the short-run response (decontamination), opportunities
to do so increase over time, though the incentives to do so decline as well (see the
discussion above of the decay rate for fear). Thus, some relocations decisions
(including branch offices and cyber space activity) affect ordinary losses, and others
affect behavioral losses estimated in this study. All will typically reduce the basic
loss estimates, though the extent to which they affect the ratio of behavioral to
ordinary BI losses is not known a priori.
One also needs to consider the potential for a reverse movement of businesses.
Abadie and Dermisi (
2011
) are investigating the movement of WTC area firms who
left Lower Manhattan right after 9/11 but are returning. The same phenomenon
could take place for the type of terrorist attack that we have analyzed, though it is
