National Economic Impact Analysis of Terrorist Attacks and Natural Disasters

National Economic Impact Analysis of Terrorist Attacks and Natural Disasters

Edited by Harry W. Richardson, Jiyoung Park, James E. Moore II and Qisheng Pan

This book develops a national economic impact model to estimate the effects of simulated terrorist attacks and natural disasters on individual US States and economic sectors. The model, called NIEMO (The National Interstate Economic Model) looks at interindustry relationships and interregional trade. It is highly disaggregated making the model very accurate. The authors examine potential attack targets including theme parks, sporting events, bridges and tunnels in the national highway system as well as attempts to shoot down airplanes or spread foot-and-mouth disease. Covered natural disasters are almost all real world: Hurricane Katrina, the Joplin Tornado, the Gulf Oil Spill and Hurricane Sandy. The effects on State economies caused by the closing international borders in response to a global pandemic is also examined.

Chapter 7: International border closures

JiYoung Park, Peter Gordon, Harry W. Richardson and James E. Moore II

Subjects: economics and finance, methodology of economics, environment, disasters, politics and public policy, political economy, terrorism and security


Recurrent reminders that an international avian influenza epidemic is a real possibility have prompted a variety of public policy discussions. A recent World Bank study estimated that the global economy would lose $2 trillion from an outbreak, or 3 percent of world gross domestic product (GDP). Another report in The Lancet (by the Harvard Initiative for Global Health Group; Murray et al., 2006), largely based on an analogy drawn from the Spanish Flu epidemic of 1918–20, presented various estimates of possible US fatalities. These included a low threshold of 114,483, a median threshold of 297,883, a mean threshold of 383,881 and a high threshold of 744,226. Applying the US Environmental Protection Agency’s (EPA) valuation of a statistical life, $5.8 million (now increased to $9.1 million by EPA, $7.9 million by the US Food and Drug Administration (FDA)), these fatalities amount to large imputed dollar amounts: $664 billion, $1.728 trillion, $2.227 trillion and $4.317 trillion, respectively. These estimates, astronomical though they are, ignore the treatment costs of those who get sick but do not die, quarantine costs and other disaster management costs.

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