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July 1, 2022

The Economic Effects of Volcanic Alerts-A Case Study of High-Threat US Volcanoes

Peers, Justin B.; Gregg, Christopher E.; Lindell, Michael K.; Pelletier, Denis; Romerio, Franco; Joyner, Andrew T. (2021). The Economic Effects of Volcanic Alerts-A Case Study of High-Threat US Volcanoes. Risk Analysis, 41(10).

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A common concern about volcanic unrest is that the communication of information about increasing volcanic alert levels (VALs) to the public could cause serious social and economic impacts even if an eruption does not occur. To test this statement, this study examined housing prices and business patterns from 1974-2016 in volcanic regions with very-high threat designations from the U.S. Geological Survey (USGS)-Long Valley Caldera (LVC), CA (caldera); Mount St. Helens (MSH), Washington (stratovolcano); and Kilauea, HawaiModified Letter Turned Commai (shield volcano). To compare economic trends in nonvolcanic regions that are economically dependent on tourism, Steamboat Springs, CO, served as a control as it is a ski-tourism community much like Mammoth Lakes in LVC. Autoregressive distributed lag (ARDL) models predicted that housing prices were negatively affected by VALs at LVC from 1982-1983 and 1991-1997. While VALs associated with unrest and eruptions included in this study both had short-term indirect effects on housing prices and business indicators (e.g., number of establishments, employment, and salary), these notifications were not strong predictors of long-term economic trends. Our findings suggest that these indirect effects result from both eruptions with higher level VALs and from unrest involving lower-level VAL notifications that communicate a change in volcanic activity but do not indicate that an eruption is imminent or underway. This provides evidence concerning a systemic issue in disaster resilience. While disaster relief is provided by the U.S. federal government for direct impacts associated with disaster events that result in presidential major disaster declarations, there is limited or no assistance for indirect effects to businesses and homeowners that may follow volcanic unrest with no resulting direct physical losses. The fact that periods of volcanic unrest preceding eruption are often protracted in comparison to precursory periods for other hazardous events (e.g., earthquakes, hurricanes, flooding) makes the issue of indirect effects particularly important in regions susceptible to volcanic activity.


Direct Impacts; Econometric Analysis; Indirect Impacts; Risk Assessment; Volcano Alert Levels; Earthquakes; Hurricanes; Threats; Housing Costs; Business Indicators; Disasters; Disaster Relief; Declarations; Volcanoes; Resilience; Tourism; Economics; Flooding; Trends; Calderas; Geological Surveys; Housing Prices; Eruptions; Precursors; Indirect Effects; Business; Disaster Management; Economic Trends; Autoregressive Models; Floods; Employment Status; Prices; Federal Government; Housing; Eruption; Economic Impact; Seismic Activity; Volcanic Activity; Earthquake Prediction; Lakes; Communication; United States--us