Economic Consequences of Aviation System Disruptions: A Reduced-Form Computable General Equilibrium Analysis

25 Pages Posted: 18 Nov 2015

See all articles by Zhenhua Chen

Zhenhua Chen

The Ohio State University-City and Regional Planning

Adam Rose

University of Southern California - Sol Price School of Public Policy

Fynn Prager

California State University, Dominguez Hills

Samrat Chatterjee

Government of the United States of America - Pacific Northwest National Laboratory

Date Written: November 17, 2015

Abstract

The state of the art approach to economic consequence analysis (ECA) is computable general equilibrium (CGE) modeling. However, such models contain thousands of equations and cannot readily be incorporated into computerized systems used by policy analysts to yield estimates of economic impacts of various types of transportation system failures due to natural hazards, terrorist attacks or technological accidents. This paper presents a reduced-form approach to simplify the analytical content of CGE models to make them more transparent and enhance their utilization potential. The reduced-form CGE analysis is conducted by first running simulations one hundred times, varying key parameters, such as magnitude of the initial shock, duration, location, remediation, and resilience, according to a Latin Hypercube sampling procedure. Statistical analysis is then applied to the “synthetic data” results in the form of both ordinary least squares and quantile regression. The analysis yields linear equations that are incorporated into a computerized system and utilized along with Monte Carlo simulation methods for propagating uncertainties in economic consequences. Although our demonstration and discussion focuses on aviation system disruptions caused by terrorist attacks, the approach can be applied to a broad range of threat scenarios.

Keywords: Economic Consequence Analysis, Aviation System Disruptions, Reduced-Form, Computable General Equilibrium (CGE) Modeling, Latin Hypercube Sampling

JEL Classification: C15, C68, D58, R40

Suggested Citation

Chen, Zhenhua and Rose, Adam and Prager, Fynn and Chatterjee, Samrat, Economic Consequences of Aviation System Disruptions: A Reduced-Form Computable General Equilibrium Analysis (November 17, 2015). Available at SSRN: https://ssrn.com/abstract=2692177 or http://dx.doi.org/10.2139/ssrn.2692177

Zhenhua Chen (Contact Author)

The Ohio State University-City and Regional Planning ( email )

275 West Woodruff Avenue
Columbus, OH 43210-1138
United States

HOME PAGE: http://u.osu.edu/chen.7172/

Adam Rose

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States

Fynn Prager

California State University, Dominguez Hills ( email )

1000 E. Victoria Street, Carson, CA
Carson, CA 90747
United States

Samrat Chatterjee

Government of the United States of America - Pacific Northwest National Laboratory ( email )

901 D Street
370 L'Enfant Promenade, S.W.
Washington, DC 20024-2115
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
57
Abstract Views
547
rank
397,025
PlumX Metrics