Report: Resiliency softened 9/11’s economic blow

USC (US)—The economic impact of the September 11, 2001 terrorist attacks was less severe than previously estimated, according to a new report that credits the U.S. economy’s resolve and resiliency.

Evaluating the lingering effect on the economy as a whole, researchers from the University of Southern California’s Center for Risk and Economic Analysis of Terrorism Events arrived at figures that ranged on average from $35 billion to $109 billion of gross domestic product (GDP), or between .5 percent and 1 percent of the annual GDP. Previous studies have estimated losses of as much as $500 billion, or 5 percent of GDP.

The researchers say the findings provide a benchmark for evaluating the economic impact of other “shock” events ranging from natural disasters to the current mortgage meltdown.

“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,” says Adam Rose, a professor in USC’s School of Policy, Planning, and Development.

“It shows that Osama bin Laden’s policy strategy to damage the U.S. economy was short-lived in its effects due to the resiliency of the U.S. economy,” adds Rose.

The full report, which appears in a special issue of Peace Economics, Peace Science, and Public Policy, shows that 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.

Other key findings show that the total business interruption losses from the 9/11 attacks on the U.S. economy was just $109 billion, or 1 percent of GDP. The decline in the gross regional product for the New York Metropolitan Area was only $14 billion, or 1.2 percent of the economy.

The estimated total physical capital loss on the World Trade Center in New York City was estimated to be $26.8 billion and lifetime earnings loss at $9.7 billion. Total estimated stock loss in 2006 dollars was estimated at $36.5 billion. Wage and salary income was roughly $6 billion (in 2006 dollars) lower than it would have been if the attack hadn’t occurred.

The study is significant, the researchers say, because it contributes to a long-standing tradition of economic research attempting to quantify the economic impact of major world events, such as natural disasters and the current worldwide recession.

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