Natural Disasters and Their Effect on the Macro Economy

Natural Disasters can have both a positive and negative impact on the local, national and the global economy. However it is rare, but not out of the question, to see the positive impact it may have on an economy. For instance, when disaster struck in Haiti from the 7.3 magnitude earthquake in 2010, between 200,000-250,000 people were killed. That is 2 percent of the total Haitian population of only 10 million. Comparatively New York City alone totals nearly as much as the entire population of Haiti with about 8.2 million people (U.S. Census Bureau, 2010). The Inter-American Development Bank estimated that it cost 8.5 billion dollars in damage to Haiti 's economy. The earthquake caused the country 's gross domestic product (GDP) to contract 5.1 percent that year. Considering that Haiti’s economy only produced 12 billion dollars in 2008, 8.5 billion dollars is a huge deficit to the overall production and functionality of their economic and social growth. That is less than a tenth of a percent of U.S. GDP of 14 trillion dollars, but Haiti’s GDP per capita is only 1,300 dollars compared to over 40,000 dollars per person in the U.S. (CIA.gov). With all of this said, Haiti brought in nearly fifteen billion dollars through donations. So although there was catastrophic and disastrous losses to both the social and economic stimulus, on donations alone, Haiti was able to receive three billion dollars more than even their best year in 2008 with only twelve billion dollars.
Proposing a theoretical situation, if an earthquake destroyed capital stock but left the labor force intact, the real rental price of capital would increase. The real rental price equals the marginal product of capital and having less capital stock available raises the marginal product of capital and therefore, raises its real rental price. This situation would also make the labor force larger in relation to available capital. Since this would lead to a declining marginal product of labor as workers have

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