Measuring the Effects of the September 11 Attack on New York City

Abstract

The attack on the World Trade Center had an enormous financial, as well as emotional, impact on New York City. This article measures the short-term economic effects on the city's labor force and capital stock through June 2002, the end of the recovery process at the World Trade Center site. Using a lifetime-earnings loss concept, the authors estimate that the nearly 3,000 workers killed in the attack lost $7.8 billion in prospective income. Moreover, the employment impact in the key affected sectors - such as finance, air transportation, hotels, and restaurants - translated into an estimated earnings shortfall of $3.6 billion to $6.4 billion, while the cost of repairing and replacing the damaged physical capital stock and infrastructure totaled an estimated $21.6 billion. Accordingly, the authors determine that the total attack-related cost to New York City through June 2002 was between $33 billion and $36 billion. The article also examines the attack's effects on the city's most economically vulnerable residents and analyzes survey findings on the incidence of post-traumatic stress disorder and alcohol and drug use after September 11.

Keywords: terrorist, growth, New York City, land values

JEL Classification: R0, R1