Assessing transboundary and intersectoral spillovers of multiple natural hazards in the Danube Region using a large-scale macroeconomic agent-based model

Strelkovskii, N. ORCID: https://orcid.org/0000-0001-6862-1768, Poledna, S., Hochrainer-Stigler, S., Sakic Trogrlic, R., Reiter, K., & Daniell, J. (2024). Assessing transboundary and intersectoral spillovers of multiple natural hazards in the Danube Region using a large-scale macroeconomic agent-based model. In: 3rd International Conference Natural Hazards and Risks in a Changing World Addressing Compound and Multi-Hazard Risk, 12-13 June 2024, Amsterdam.

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Abstract

The potential for systemic risks arising from interconnected social, technical, and economic systems is becoming increasingly evident as climate change leads to more frequent and severe natural hazards and multi-hazard events (e.g., compound and cascading hazards) that can lead to unforeseen consequences on various levels. We present a large-scale macroeconomic agent-based model (ABM) designed to trace the spread of indirect losses caused by natural hazards across different regions and sectors. Using the Danube Region as a case study, we simulate economic and social ripple effects resulting from direct physical damages (i.e., loss and damage of capital stock) caused by various hazard scenarios, such as compound flooding, consecutive floods and droughts, and compound flooding and earthquakes. Our ABM is designed to capture micro-level behaviours and agent heterogeneity in terms of adjustment in response to direct damages both on the supply and demand sides of goods and labour markets, e.g., supply chain disruptions and reduction of production capacities. The ABM is calibrated on the NUTS-2 regional scale and incorporates dozens of industries. Using macroeconomic aggregates and a risk ratio metric comparing direct and indirect exposures, we quantify industries, regions and population subgroups most severely affected by indirect impacts on a short- to medium-term based on their positions within a wider economic network. We demonstrate that ABMs can be utilized to conduct participatory investigations of cascading risks that extend beyond individual impacts and encompass risk proliferation across both sectorial and regional boundaries. Our approach reveals latent vulnerabilities within economic networks that may pose potential risks, despite not being immediately apparent.

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