Using an integrated dynamic economic model to support infrastructure investment decision-making

Abstract

Evaluating investment options to enhance earthquake resilience of infrastructure requires a deep understanding of the economic impacts of loss of infrastructure services. This article presents an economic impact assessment of a hypothetical Wellington Fault earthquake event to support the case for a suite of infrastructure resilience enhancements in Wellington, New Zealand. The project builds a comprehensive picture of the event, pre-investment, including electricity disruptions of up to 6 months, temporary population movement of 25%, and business relocation of up to 11% in some industries. MERIT, a dynamic economic analysis tool specifically designed to evaluate “shock” events, estimates the proposed investment options (valued at NZD2016 2.2–2.6 billion) result in reduced event losses of NZD2016 6 billion over 5 years. The project illustrates the need to continue improving modeling capability to support decision processes and to concurrently evolve decision-making processes to match our increasingly sophisticated, dynamic, and multi-dimensional economic evaluation tools.