Economic Impact of 9/11 Much Lower than First Believed

Thursday, 27 August 2009 13:11
Getty Images : Manhattan Street on 9/11
By Larry Kahaner This e-mail address is being protected from spambots. You need JavaScript enabled to view it , HSO Editor

Despite the psychological and emotional aftereffects of the terrorist attacks on September 11, the US economy appears to have been largely unscathed, according to a collection of eight studies recently published as a volume in a special issue of Peace Economics, Peace Science, and Public Policy.


Researchers evaluating the impact on the US economy say that losses ranged on average from $35 billion to $109 billion of gross domestic product, or between .5 percent and 1 percent of the Gross Domestic Product (GDP). Previous studies put losses as high $500 billion, or 5 percent of the annual GDP, according to the authors.

Among the key findings:

- The total business interruption losses from the 9/11 attacks on the US economy were $109 billion, or 1 percent of the GDP. The decline in the Gross Regional Product for the New York Metropolitan Area was $14 billion, or 1.2 percent of the economy.

- Looking only at the impact on the World Trade Center, researchers estimated the total physical capital loss to be $26.8 billion and lifetime earnings loss at $9.7 billion.. Wage and salary income for the New York Metro Area was roughly $6 billion (in 2006 dollars) lower than it would have been if the attack hadn't occurred.

- Several authors attempted to separate the individual effects of the recession from the 9/11 attacks. Despite the challenges in doing so, after examining declines in industrial production, they concluded that the national economic impact of 9/11 appears to have been modest and of a short duration. At the regional level, they found the impact was seen more in spurring relocations than in reducing economic activity.

“This is the most comprehensive study to date on the economic impacts of 9/11, and it can be applied towards future planning and preparation in the event of future terrorist attempts,” said Adam Rose, a research professor with the USC School of Policy, Planning, and Development and co-editor of the reports.

Rose is also coordinator for Economics with CREATE, which was the first of more than a dozen University Centers of Excellence on Research and Education established by the Department of Homeland Security to provide independent analysis of terrorism and natural disasters. “It shows that Osama bin Laden's policy strategy to damage the US economy was short-lived in its effects due to the resiliency of the US economy.”

Portions of the research had been presented during the North American Regional Science Council Meetings last November in New York City, but the complete report has just been released.

One aspect of the studies that is different from other economic impact studies of 9/11 is the inclusion of resilience as a factor in allowing for the economy to adapt to unusual circumstances. For example, 98 percent of the businesses in the World Trade Center area didn’t fail after the attacks. Instead, they relocated outside of the destroyed zone, primarily in the New York City metropolitan area.

The CREATE study also took into consideration behavioral linkages, which are typically overreactions to a situation that exacerbates the losses. The main example of this is the almost two-year decline in US domestic airline travel as a result of people avoiding planes out of fear of a similar attack.

The costs do not take into consideration some social or environmental costs such as the value of the 3,000 lost lives or medical treatments for diseases such as post-traumatic stress syndrome for emergency workers and family members.

The reports can be download from: http://www.bepress.com/peps/