Economic consequences of the HayWired earthquake scenario

Abstract

This study evaluates the economic impacts of a M w 7.0 Hayward fault scenario earthquake on the greater San Francisco Bay Region’s economy and the California economy as a whole using a detailed multiregional, static computable general equilibrium model. Economic impacts in terms of Gross Regional Product (GRP) losses caused by both capital stock (building and content) damages and water and electricity utilities, and telecommunications-service disruptions are estimated. The results indicate that the total losses are primarily caused by capital stock damages. In the 6 months following the earthquake, total GRP losses are estimated to be $44.2 billion (4.2 percent of California’s projected baseline GRP over the period), but this result could be reduced by about 43 percent to $25.3 billion after factoring in microeconomic resilience tactics. The GRP losses associated with lifeline service disruptions are estimated to be $1.4 billion, which can be reduced by over 85 percent when resilience tactics are implemented. The most effective tactics are the ability to make up lost production by people working overtime or extra shifts (production recapture), making greater use of processes that do not need disrupted goods or services (production isolation), and substituting for disrupted supplies and services (input substitution), though their impact varies across the various causal factors influencing GRP losses.