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A SCGE model For Estimating Economic Impact Of Port Disruption
A SCGE model For Estimating Economic Impact Of Port Disruption
Junho Choi,Junho Choi,Hirokazu Tatano, Hirokazu Tatano,
Yuta Funase Yuta Funase and and
Satoshi TsuchiyaSatoshi Tsuchiya1
OutlineOutline
• Backgrounds• Methods• Structure of models• Case study• Conclusion
2
Back grounds(1) Why Ports & Harbors ?Back grounds(1) Why Ports & Harbors ?
• Critical Infrastructure– assets that are essential for the functioning of a society and economy
– e.g., electric power supply, logistic networks, etc..
• Global Critical Infrastructure– Its malfunction causes international impacts in societies and economies
• Ports and Harbors– Occupy over 99% of flights share in global trade in weight of cargo
– Global trades are essential for many countries in a globalized world, especially one of national key strategy in eastern Asian countries
• E.g. Shanghai, Pusan, etc.
3
Backgrounds(2)Backgrounds(2)
4
Malfunction of a port
Stoppage of exports from the affected port
Stoppage of imports
Alternation of ports for exports Continuous
usage of the alternative port
Increase of inland transportation costs
Increase of consumers price
Decrease of demand
Decrease of production
Change in logistic networkse.g. Port of Kobe
Recovery Investment
Demands in Recovery Activities
What could occur if an international port is malfunctioned by a disaster?
Natural Disaster
4
Increase of inland transportation costs
Increase of consumers price
Decrease of demand
Decrease of production
Alternation of ports for imports
Increase in debt
Backgrounds(3)Backgrounds(3)
• Question– Is an important port in a country really global critical infrastructure?
– What type of impact to the domestic and other countries market?
5
Huge? Small?
For Companies?
For Government?
For Consumers?
For Industries?
Positive? Negative?
ObjectivesObjectives
• Estimation of economic impact caused by malfunction of a harbor– Not only in the affected countries but also in other countries which connected by global trade networks
– In different economic sectors, e.g., industries and households.
6
Strategies for Disaster Risk Governance of Global Critical Infrastructure
6
MethodMethod
• International trades are described by SCGE Model• Compare equilibriums between global economies with/without
disruption of a port • Measure the economic impacts in industries and households in
each country
7
International SCGE model
Before a disaster After a disaster
Disaster
comparison
7
International SCGE model
Structure of the modelStructure of the model
8
Port selectionPort selection
Firm
demand Transportation cost demand Transportation cost
International Model(SCGE) & National Model
Country BCountry B
County A
trade
Firm Household
Country B
International Model(SCGE)
Firm Household
Structure of the modelStructure of the model
9
Country BCountry B
Country A
trade
Firm household
Country B
International Model(SCGE)
International Model(SCGE)&National model
Firm household
9
International Model (SCGE)International Model (SCGE)
• Trade occurs in N countries• International trades are affected
by transportation costs• Armington assumption
– Commodities produced in different countries are treated as different goods
10
Industries household
Labor/Capital Market
Labor/Capital Market
Commodity market
Commodity market
Industries Household
Commoditymarket
Commoditymarket
Labor/capital market
Labor/capital market
Country i
Country j
TradeNational Economy
• Household– Represented by a single
household– Consumes Commodities– Provides labor and capital
• Firms– M industries– Supply products in domestic and
international markets10
Description of behaviors Description of behaviors
• Profit Maximization• producing a good with Labor, capital
and intermediate goods
11
Product
Value added
Intermediate good 1
Intermediate good 2
Labor Capital
Leontief Function
Cobb-Douglas Function
• Consumption of goods are determined to maximize its utility under a constraint of income
• Income of the household is obtained by providing labor and capital to industries
Firms behavior Household behavior
Utility
Good3Good 1
Good 2
CES Function
11
AssumptionsAssumptions• Price & transportation cost
– Transportation cost is represented by Ice‐burg type TC that some part of the goods will be decreased like ice burgs.
– Price relations
• Goods produced in the foreign counties– Stage one:in each industry, a composite foreign good is produced by
use of goods produced in the foreign countries.– Stage two:a composite good is produced by use of a domestic good
and the foreign composite good.• Labor……..is not mobile over counties but move in domestic labor
market• Capital……is mobile over domestic industries and countries
12
)1( kli
ki
klif pp τ+=
Transportation Margin
FOB Price
CIF Price
12
Treatment of foreign goods in the modelTreatment of foreign goods in the model
1313
Foreign countries
Foreign countries
Domestic Economy
Household Intermediate good
Firm inCountry 1
Firm inCountry 2
Firm
Stage twocomposition sector(virtual)
Stage onecomposition sector(virtual)
Stage onecomposition sector(virtual)
Firm inCountry 1
Firm inCountry 2
Structure of the modelStructure of the model
14
Domestic transportation
firm
price Trans. Cost price Trans. cost
International model(SCGE)&Domestic model
Country BCountry B
Country A
trade
Country B
International SCGE Model14
Domestic transportation modelDomestic transportation model
15
Country A
Country B
Country C
• Alternative port will be used in the disaster affected country.
• Inland transportation cost will be increase.
• International shipping cost will also affected.
ljlandτ
'ljlandτ
lkjseaτ
'lkjseaτ
15
Port B
Port A
Change in conditions for exports Change in conditions for exports
16
P
QkaiQr
as−1
Demand
Marginal costin ordinary transportation conditions
quantity
price Supply function
kiothersQ
'kip
kip
),( ki
ki PQ
)','( ki
ki PQ
ki
kai
QLoss
kiQ
ki
ki PQ , :production and price
of good i in ordinary condition
',' ki
ki PQ
kaiQ :shipping volume from
port a :shipping volueme from other ports
kiothersQ
Marginal costin transportation conditions with a malfunction of a port
:production and price of good i after the disruption of port a
Equilibrium condition in disasterEquilibrium condition in disaster
variable in disaster
Exogenous Variables
tariff fixed
transportation cost Changed
Endogenous Variables
capital fixed / variable
labor variable
price(f.o.b) variable
price(c.i.f) Variable
17
• A natural hazard is assumed to bring about disruption of function of a port, and/or stoppage of usability of damaged sea lanes.
• These causes changes of transportation cost within affected countries and/or between countries.
• Allocation of capital is assumed to be fixed at the level of the ordinary condition in the short‐run equilibrium but variable in the long‐run equilibrium.
17
Case: Port of Nagoya Case: Port of Nagoya
18
Port of Nagoya(名古屋港)
Total export from Japan is 83.9 trillion JP Yen
引用:名古屋税関貿易統計(2007) 引用:名古屋税関貿易統計(2007)
• Trade Weight Share : No.1 share• Export share in sea ports: No.1 share• Import share in sea ports: No. 2
share• Metal/ Machinary Industry is high
• Trade Weight Share : No.1 share• Export share in sea ports: No.1 share• Import share in sea ports: No. 2
share• Metal/ Machinary Industry is high
18
Special goodsMiscellaneousLight industrialChemical Metal/MachinaryMiningForestryAgricultural/fishery
Case: Data & SettingCase: Data & Setting• International IO table……………… GTAP Database• Economies……………………………… 9 economies• Industries………………………… 9 industries
19
Agriculture and Fisheries
Forestry
Mining
Metal
Chemical
Light Industry
Miscellaneous Industry
Special goods
Not categilozable
Statistics of Port of Nagoya
1 Agriculture and Fisheries
2 Forestry3 Mining4 Metal5 Chemical6 Light Industry
7 Miscellaneous Industry
8 Utility, Construction and Transportation
9 Services
Increase of transportation cost in each
sector
Increase of transportation cost in each
sector
Trade volume (in weight)ThroughPort of Nagoya
Trade volume (in weight)ThroughPort of Nagoya
×Increase of
transportation cost per Ton
×Increase of
transportation cost per Ton
引用元:名古屋港貿易統計(2007)
GTAP57
sectors
GTAP57
sectors
Fitting resultsFitting results
20
Case: SenarioCase: Senario• Inland transportation increase
– Malfunction of Nagoya port stops imports and exports through the port.– Increased share of the other port are assumed
• Port of Tokyo, Yokohama Port, Osaka Port, Port of Kobe, etc…
– We assume shares of alternative ports based on the Kobe quake – Inland transportation cost is estimated by the cost for 5ton tracks.
21
Inland transportation costs and share to alternative ports
Alternative ports
distance(km)
Transportation cost(Yen/Ton)
Share(%)
Kobe 194 3,950 10Osaka 183 3,950 15Sakai‐
senboku 208 4,408 2
Tokyo 353 5,485 40Yokohama 331 5,128 25Yokkaichi 34 2,684 5Shimizu 193 3,950 2Hitachi 485 6,207 1
Japan
Inland trans‐portation
Other country
Malfunction Nagoya port
Disruption of Nagoya port and its impact
注:「自動車貨物運賃料金表」より距離に応じた輸送費用を算出
Result:ProductionResult:Production• Production in Japan will decrease significantly.• Effect of production in other countries can be positive and negative.
22
Japanese Production is very much affected
R o
W
Africa
Oth
er
Asia
nEUC
hin
ese
Ta
ipe
iK
ore
a
Ch
ina
US
A
Jap
an
R o
W
Africa
Oth
er
Asia
nEUC
hin
ese
Ta
ipe
iK
ore
a
Ch
ina
US
A
Jap
an
Result:Effect in Domestic IndustriesResult:Effect in Domestic Industries• Production of Metal/Machinery industry is highly affected.• Subject to the reduction of the production, production reductions in other sectors also are
reduced
23
Result:Trade(Metal/Machinery Industries)Result:Trade(Metal/Machinery Industries)
24
Increase in EU is dominating
Result:Welfare AnalysisResult:Welfare Analysis• Contrasting to the production changes, most of the economy will have negative welfare impacts.• Shorter run impact in Japanese economy is milder than longer‐run impact, because capital
escape from Japan because of higher inland transportation cost and lower marginal product of industries in Japan.
25
Case (1) Short-run (Capital is fixed) Case (2) Long-run (Capital is also variable)
ConclusionConclusion
– measurement of economic impact of port disruption– Economic impact to affected country could be significant – In the other country, positive and negative impacts are observed– Welfare analysis tells that all the economy have negative impacts– Long‐ran impact to the affected country could be more severe
because of reallocation of capital– Urgent recovery of affected port is important
– More Case Studies– Domestic model should incorporate transportation models
26
Summary
Future Studies
AppendixAppendix
• Alternative port selection during Port of Kobe was not functioning.
27
Alternative portsContainer (Tons/Months)
Ratio
Osaka 468,727 27.0%Sakai-Senboku 21,494 1.2%Tokyo 681,752 39.3%Yokohama 498,938 28.7%Yokkaichi 2,130 0.1%Shimizu 61,513 3.5%Hitachi 2,122 0.1%
Thank you for your kindness attention!
28The Fifth China Japan Joint Seminar on Risk Management2010 March 25-27th
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