Computable General Equilibrium Assessment of a Compound Disaster in Northern Taiwan

Taiwan has high‐tech export‐oriented industries, such as semiconductors and electronic equipment. The capital city area is home to the main industrial complex and has a major fault line running through it. Three out of four nuclear power stations in Taiwan are located close to the capital. Using a single‐country computable general equilibrium model, we simulate a compound disaster consisting of a major earthquake and a power crisis induced by nuclear power shutdown in northern Taiwan to quantify its impact on the Taiwanese economy. Simulation results show that Taiwan's flagship industries, such as semiconductors and electronic equipment, would be severely affected by capital and labor losses in an earthquake but not in a power crisis. This implies that no policy intervention to allocate power to these industries is needed, although we are often tempted to do so in emergencies.