Economic Impacts of a Midwestern Earthquake

Indirect loss is any loss other than direct loss. This seems tautological, however, it is important to begin with the obvi-ous. Direct loss is a loss linked directly to an earthquake. It includes all damages, plus employment losses due directly to the closure of the damaged facility. Indirect losses/gains are anything else. Direct losses can produce dislocations in factories or commercial ventures (real ripple effects), bank-ing, which causes uncertainty and a subsequent tightening of overall credit conditions (bank systemic risk), and insur-ance, thereby limiting coverage and triggering subsequent economic dislocations (insurance systemic risk). Real ripple effects stem from supply shortages or sudden reductions in demand. The relative size of the ripple hinges on the geographic area of focus, and the time frame under scrutiny. Losses can be displaced both geographically and temporally. As will be shown in the following discussion, ripples must be negative for the nation, but can, with the receipt of outside assistance, prove positive for the impacted region. This article presents research conducted to date on the develop-ment of models to forecast the economic impacts of earthquakes. Comments and questions should be directed to Hal Cochrane