Economic Impacts of the ShakeOut Scenario

Abstract

For the ShakeOut Earthquake Scenario, we estimate $68 billion in direct and indirect business interruption (BI) and $11 billion in related costs in addition to the $113 billion in property damage in an eight-county Southern California region. The modeled conduits of shock to the economy are property damage and lifeline service outages that affect the economy's ability to produce. Property damage from fire is 50% greater than property damage from shaking because fire is more devastating. BI from water service disruption and fire each represent around one-third of total BI losses because of the long duration of service outage or long restoration and reconstruction periods. Total BI losses are 4.3% of annual gross output in the affected region, an impact far larger than most conventional economic recessions. These losses are still much lower than they potentially could be due to the resilience of the economy.