The Effect of Natural Hazard Damage on Manufacturing Value Added and the Impact of Spatiotemporal Data Variations on the Results

Abstract

This study examined the effect of natural hazards on manufacturing industry value added and the sensitivity of the results from changes to spatiotemporal resolution of the data. We measured the negative effects of hazards, rather than the net effect. Three models were developed with varying spatiotemporal units for the continental United States: annual/county units; annual/state units; and quarterly/state units. Three simulations were run using each model to estimate the negative effect of damage from all natural hazards on value added across spatiotemporal scales. Finally, an investment analysis was conducted to examine the return from public investments in hazard resilience. The results do not demonstrate that, locally, natural hazards reduce value added. However, the evidence suggests that natural hazards in the upstream supply chain have statistically significant impact when modeled at the annual/county scale and at the quarterly/state scale. Neither local nor supply chain hazards have a statistically significant effect when modeled at the annual/state scale, suggesting that broader spatiotemporal units may obscure the true downstream effects of natural hazards. The investment analysis, utilizing model results, suggests that an investment of USD 100 billion or less is economical if it results in a reduction in losses of 10% or more.

Keywords

Manufacturing / Natural hazards / Spatiotemporal impacts / United States / Value added

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