Economic impacts of storm surge events: examining state and national ripple effects

Prepared by:

Meri Davlasheridze, Qin Fan, Wesley Highfield, and Jiaochen Liang

Prepared for:

Climactic Change

Publication Date:

May 8, 2021

Understanding socioeconomic consequences of natural disasters both locally and nationally is critical in assessing and informing mitigation strategies to combat future catastrophic threats. We develop a state-level computable general equilibrium model and assess the vulnerability of state and US national economies to surge events affecting coastal communities and strategic industrial assets including petroleum and chemical manufacturing in the south-eastern region of Texas. In addition to enumerating these impacts, our model also assesses loss avoidance associated with one kind of adaptation strategy, a storm surge suppression system, that has been proposed for the region to address growing concerns over storm surge inundation. Our results indicate persistent and adverse long-term impacts of storm surge events on the
economies of Texas and the USA without the surge suppression system. Importantly, while neighboring states may temporarily benefit from substitution effects and reallocation of resources, the majority of states will suffer welfare losses as a result of surge-induced impacts in Texas. Adjusting impacts by storms’ return probabilities, the average annualized decline in Texas Gross State Product is approximately 0.05%in 2066, corresponding to $5 billion, while welfare and personal income will decline by 0.05% and 0.04%, respectively. Model simulations with the storm suppression system indicate moderation in negative impacts. Our research provides a modeling framework for assessing economic impacts of disasters and further contributes to estimating ripple effects on national and regional economies.