Structural economic effects of large scale inundation: A simulation of the Krimpen dike breakage

Abstract

The paper's main concern is to establish the general methodology for total economic loss estimation as a result of a large-scale flooding.The issue of economic loss definition is raised in the attempt to unify the scattered definitions met in the disaster literature as well as to provide clear implementation implications for the definition established.Total effect, as defined in the paper, includes the direct loss to households and government, and production interruption as well as the indirect costs caused by the 'ripple' effect.Input-output model is chosen as a framework approach in evaluation of the indirect costs.The necessary adaptations are brought into the model to account for such important asymmetric shock aspects as 'production bottlenecks' and substitution effect; the time dimension of the model is 2-year period.Bi-regional input-output table is utilised for this purpose to trace the inter-regional ties within the country as well as to elaborate on the disaster-induced changes of the economic structure.The example of case study of a dike breakage in the South Holland province in the Netherlands is examined serving a fruitful playground for vast economic consequence modelling.Two basic models are compared.Given the same level of business disruption the maximum damage evaluation overestimates the economic loss, whereas the alternative adapted model provides for more moderate (though still significant) total damage estimate.