Abstract
This study proposes a probabilistic methodology for estimating the business interruption loss of industrial sectors as an extension of current methodology. The functional forms and parameters are selected and calibrated based on survey data obtained from businesses located in the inundated area at the time of the 2000 Tokai Heavy Rain in Japan. The Tokai Heavy Rain was a rare event that hit a densely populated and industrialized area. In the estimation of business interruption losses, functional fragility curves and accelerated failure time models are selected to estimate the extent of damage to production capacity and production recovery time. Significant explanatory variables, such as inundation depth, distinct vulnerability, and the resilience characteristics of each sector, as well as the accuracy of fit of the model, are analyzed in the study. The function obtained and the estimated parameters can be utilized as benchmarks in estimating the probabilistic distribution of business interruption losses, especially in the case of urban flood disasters.
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Notes
Based on Rose (2004), higher-order effects include all effects on flows (e.g. goods or service) caused from the physical damages, such as interindustry, general equilibrium, or broader macroeconomic effects.
In fact, survey data about drop ratios of production capacity are continuous. The reason for adopting categorized data is for the benefit of loosening the assumptions required for our probability models. More parameters and assumptions are necessary for modeling the error terms in the case of the continuous model; we avoid this discussion by considering our case of limited dependent variables and small data sets.
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Acknowledgments
This work was conducted under the framework of the “Precise Impact Assessments on Climate Change” of the Program for Risk Information on Climate Change (SOUSEI Program) supported by the Ministry of Education, Culture, Sports, Science, and Technology in Japan (MEXT). The questionnaire data used in this study were provided by the Ministry of Land, Infrastructure, Transport, and Tourism (MLIT).
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Yang, L., Kajitani, Y., Tatano, H. et al. A methodology for estimating business interruption loss caused by flood disasters: insights from business surveys after Tokai Heavy Rain in Japan. Nat Hazards 84 (Suppl 1), 411–430 (2016). https://doi.org/10.1007/s11069-016-2534-3
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DOI: https://doi.org/10.1007/s11069-016-2534-3