SEI_Lib 0.5 Capital_Stock_Model

The Social and Economic Impact Module (SEIM) constitutes one of the three main components of the Global Earthquake Model (GEM) together with the Seismic Hazard and Seismic Risk components. Together with the Population Cohort Model, the Capital Stock Model will constitute an input to the Macro and Micro Economy Segment Calculator, and will feed back forecasted information into the Seismic Risk component. The Capital Stock Model will make use of the value of physical assets estimated under such component, together with other macroeconomic information extracted from countries' System of National Accounts (based on United Nations guidelines), for point-estimating economic value of capital stocks. Subsequent estimates (year by year basis) of capital stocks will be obtained under two alternative methods: A Capital Vintage System Dynamics model, and the Perpetual Inventory Method. Information will be disaggregated at geographic levels, as defined in the Seismic Risk Component.

link_to_notes (this goes to etherpad)

• Assumptions

  • The data is in two different resolutions: One regional given by geographical coordinates and another at the national level, from National Accounts.
  • Classification of physical assets should be made compatible with that given by United Nations's System of National Account
  • Capital stock values at national level is estimated based on information about physical assets, as obtained in the Seismic Risk Component, and other economic variables from National Accounts
  • Estimated values of capital stocks at every point of time (year by year basis) of the forecasted period will be updated based on assumptions about the depreciation rate plus data on gross and net fixed capital formation, from the countries' National Accounts.
  • The value of Capital Stocks has to be expressed in a common monetary and valued at prices of a given year.
  • Physical assets depreciate following a pre-defined methodology (for instance, the straight-line or declining balance method)
  • Physical asset valuation across time will be carried on at current and constant prices
  • Physical assets get discarded at the end of their useful life (when their monetary value decrease to zero, or to scrapping value)
  • The value of physical assets affected by shocks, such as seismic events, will be reduced according to methods defined in the Seismic Risk Component
  • Estimated values of the capital stock, together with those of population and human capital from the Population Cohort Model, will be inputs for a production function in the Macro economy segment calculator.
  • Estimated values of capital stocks will be disaggregated at grid level to feed back into the Seismic Risk Component.

• Design

Values of Capital Stocks will be estimated under alternative methods, namely, a Capital Vintage Model and a Perpetual Inventory Model. Both models consider the rate at which capital stock depreciates, depending on utilization and / or age, the incorporation of new capital by means of gross capital formation, and discard rates resulting, among others, from natural shocks, such as seismic events. Capital stocks are valued according to price indexes given by the countries' System of National Accounts.

• User stories:

  • Some user should be able to X.
  • Some user needs to be able to Y.

• Suggested Implementation

The model should integrate into OpenQuake as a set of models similar to the existing Hazard & Risk models. It should be possible to run as a sub-task in an existing openquake / RiskLib job.

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