How Does the Earthquake Affect Economic Growth with System Dynamics Approach (Case Study of Tehran)

Natural disasters affect economic growth, and due to the location of Tehran, as the capital of Iran, on the Rey fault, Masha, and North of Tehran, the present research was conducted to investigate the effect of earthquakes on the Rey fault on the economic growth of Iran. The economic growth of Iran has been simulated for 40 years, starting from 2013, and through cause and effect cycles, the long-term economic effects of a possible earthquake have been simulated. The innovation of the current research is the economic growth model is designed in terms of product production, knowledge production, production of intermediate energy goods, and the performance of the insurance industry as a part of the financial sector. Also, the influence channels of the earthquake on Roemer’s endogenous economic growth model have been simulated using the system dynamics method. The results show that causalties will lead to a reduction in human resources and, as a result, a slight decrease in Iran’s economic growth in the long-term. Secondly, the destruction will lead to the reduction of physical capital and, as a result, the reduction of economic growth in the long term. Thirdly, reconstruction costs will have a negative effect on economic growth, which will diminish in the long run.