A Demand-Side Inoperability Input–Output Model for Strategic Risk Management: Insight from the COVID-19 Outbreak in Shanghai, China

Abstract

This paper proposes the dynamic inoperability input–output model (DIIM) to analyze the economic impact of COVID-19 in Shanghai in the first quarter of 2022. Based on the input–output model, the DIIM model introduces the sector elasticity coefficient, assesses the economic loss of the system and the influence of disturbances on other sectors through sectoral dependence, and simulates the inoperability and economic loss changes through time series. A multi-evaluation examination of the results reveals that the degree of inoperability of sub-sectors is inconsistent with the ranking of economic losses and that it is hard to quantify the impact of each sector directly. Different from the traditional DIIM model that only considers the negative part of the disaster, the innovation of this paper is that the negative value of the inoperability degree is used to measure the indirect positive growth of sectors under the impact of the Shanghai pandemic shock. At the same time, policymakers need to consider multi-objective optimization when making risk management decisions. This study uses surrogate worth trade-off to construct a multi-objective risk management framework to expand the DIIM model to enable policymakers to quantify the trade-off between economic benefit and investment costs when making risk management decisions.