9/11 Economic Factors

The households (or consumers), the private sector (or producers), and the public sector (or the government) depending on their involvement in a terrorist attack, economic agents may suffer from (i) direct impacts through losses in physical and human capital, and (ii) indirect impacts that emerge as consequence of the distortion of the economy. First-hand economic damages of terrorist activities have attained recent dimensions in consideration of the unprecedented magnitude of 9/11. Therefore, it is not surprising that the core of the literature focuses on this event as a special case. The destruction that took place includes physical and human losses which by far exceed the average scale of terrorist attacks: Human losses amounted to over 3,000 lives lost (including office workers, aircraft passengers and hundreds of rescue personnel), excluding the unaccounted number of people who suffered temporary and permanent injury, who experienced health problems caused by air pollution from the collapse of the buildings, not to mention the severe trauma and psychological impacts on these victims and their families.
Navarro and Spence (2001) estimate that human capital losses alone account for US$ 40 billion while property losses ranged “only” between US$ 10 and 13 billion.
Yet, 9/11 is certainly an outlier with regard to the physical damage and human fatalities it caused, compared, e.g., to the majority of predominately separatist terrorist attacks that have been experienced in Europe. Apart from its scale, two other key differences between 9/11 and “conventional” terror attacks prevail: firstly, recent transnational terror attacks can be characterized as large scale but single events, whereas, e.g., terrorist attacks in Europe can mostly be characterized as small scale but more