Regional indirect economic impact evaluation of the 2008 Wenchuan Earthquake

Abstract

Disaster loss estimates are helpful for managing post-disaster reconstruction and for designing disaster-risk mitigation strategies. However, most of these estimates in China merely consider direct losses, and only a few include indirect economic losses. As the most destructive earthquake since the founding of the People's Republic of China in 1949, the Wenchuan Earthquake that occurred in 2008 resulted in direct economic damages reached Chinese Yuan (CNY) 845 billion (US $124 billion). The aim of the study was to estimate indirect economic losses caused by the Wenchuan Earthquake in Sichuan Province through the Adaptive Regional Input-Output (ARIO) model, which can reflect disaster-related changes in production capacity, ripple effects within the economic system, and adaptive behaviors of economic actors. The results showed that indirect economic losses in the production and housing sectors were estimated at 40% of the direct economic losses, i.e., approximately CNY 300 billion; moreover, the model predicted an 8-year reconstruction period. Several factors contributed to these losses, including significant damages to key sectors, financial constraints on reconstruction, post-earthquake investment instability, and limits in reconstruction capacity. Active government support policies post-earthquake are a useful strategy to mitigate the adverse economic impact of an earthquake in developing countries.