Modeling a major source of economic resilience to disasters: recapturing lost production |
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| Authors: | JiYoung Park Joongkoo Cho Adam Rose |
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| Institution: | (1) Department of Urban and Regional Planning, University at Buffalo, The State University of New York, Buffalo, NY, USA;(2) Center for Risk and Economic Analysis of Terrorism Events, University of Southern California, Los Angeles, CA, USA;(3) Daniel J. Epstein Department of Industrial and Systems Engineering, Viterbi School of Engineering, University of Southern California, Los Angeles, CA, USA;(4) School of Policy, Planning and Development, University of Southern California, Los Angeles, CA, USA |
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| Abstract: | Terrorist attacks and natural disasters have potentially severe economic consequences in terms of property damage and business
interruption. However, experience from the September 11 World Trade Center attack and other disasters indicates that the economy
has a great deal of resilience. This refers to the ability to dampen the maximum potential economic output (business interruption)
loss. One of the most prominent sources of resilience is the ability of businesses to reschedule, or recapture, lost production
after the event. Although there have been applications of a fixed parameter recapture factor for each of several aggregated
sectors of the economy, there has been little formal analysis of this resilience action. This study offers a theoretic framework
for analyzing production rescheduling. It distinguishes the major conditions influencing two aspects that have previously
been neglected: (1) the maximum time span over which the rescheduling can take place and (2) the likely decline of the maximum
recapture as the business interruption increases. We divide the relevant time path into two periods after recovery. One is
a function of a recaptured output path after recovery to the status of normal production. The other is a function for the
maximum recaptured production, based on the recaptured output path. The recaptured output path function is assumed to follow
a normal distribution function, and hence, total recaptured output follows the cumulative normal distribution function over
time after productive capacity is restored. Also, we develop a new cumulative normal distribution function for interruption
time duration, which is symmetric with respect to the output axis. This recapture function has unknown parameters. Empirical
data on the recaptured amounts following an actual disaster can be used to estimate the parameters of this function using
simulation methods. |
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