Economic Ripple Effects of Individual Disasters and Disaster Clusters

Abstract

Disaster clusters refer to major disasters that cluster in space and time without any linkage, resulting in large direct damage and economic ripple effects (EREs). However, the cumulative EREs caused by a disaster cluster may not be equal to the summation EREs of the individual disasters within a cluster. We constructed a global economic ripple input-output model suitable for the analysis of disaster clusters and demonstrated the extent of this difference with the example of two typical catastrophes that occurred in 2011 (the Great East Japan Earthquake and the Great Thailand Flood), within an interval of only 136 days. The results indicate that: (1) The EREs suffered by 11 of the 35 countries affected (30%) are “1 + 1 > 2”, and “1 + 1 < 2” for 24 of the 35 countries affected (70%). This indicates that there is a significant difference between the cumulative and the summation losses. The difference is related to factors such as trade distance, economic influence of disaster-affected sectors, and trade ties; (2) The EREs are more than two times the direct loss and have an industrial dependence, mostly aggregated in key sectors with strong industrial influence and fast trade times in the industrial chain; and (3) Additional EREs due to the extension of the recovery period will be aggregated in countries with close trade ties to the disaster-affected country, further magnifying the difference.