Improving precision in earthquake loss estimation

Using economic theory, this paper provides refinements and enhanced precision in the estimation of earthquake losses. We consider direct and indirect losses for business entities belonging to the COM4 occupancy class. We examine two loss categories: direct (content, relocation, business income, wages and rental), and indirect (business gross domestic product (GDP), employee GDP and supply-chain), together accounting for eight loss-types. Using HAZUS as a benchmark, we provide a comparative assessment of HAZUS and our proposed approach to loss estimation. The results show significant differences in total economic loss and individual loss categories between HAZUS and our proposed approach. We discuss implications of our findings for over- and under-allocation of scarce economic resources, and assessment of engineering designs from the perspective of social, economic, and public policy decisions, as well as academic research. Future extensions of this methodology into other loss categories and occupancy classes are discussed.