Regional Dynamics Under Adverse Physical and Behavioral Shocks: The Economic Consequences of a Chlorine Terrorist Attack in the Los Angeles Financial District

Emergency management decision makers must make contingency plans for a wide range of threat scenarios. In undertaking ex-ante cost/benefit evaluations of contingency plans, they must understand the economic benefits of threat deterrence and reduction. Appropriate emergency response and recovery activities ex-post can attenuate business interruption (BI) impacts. Regional economic modeling can provide quantitative input to these evaluations. In this paper, we use a large-scale dynamic regional computable general equilibrium (CGE) model of the Los Angeles economy to perform an economic consequence analysis of a terrorist attack with chlorine gas. We divide the event’s direct effects into resource losses (injuries, BI) and behavioral reactions stemming from fear. We provide a decomposition of aggregate economic effects in terms of these various loss components, allowing us to elucidate the relative sizes of potential loss channels. We also discuss the effect of geographic shifts of economic activity within the affected region and in neighboring regions in estimating the losses. Our analysis can assist risk managers in developing plans for pre-event mitigation and post-event resilience.