Economics Stack Exchange is a question and answer site for professional and academic economists and analysts. Join them; it only takes a minute:

Sign up
Here's how it works:
  1. Anybody can ask a question
  2. Anybody can answer
  3. The best answers are voted up and rise to the top

Assuming no income was lost, only assets were destroyed (e.g. homes), how does disaster event impact GDP numbers?

Or otherwise, is losing and rebuilding wealth neutral to GDP (e.g. spending on construction instead of entertainment)?

Is GDP calculated so well that all subtle effects are reflected in the numbers (e.g. lost home might affect work opportunities in mid-term)?

share|improve this question
up vote 6 down vote accepted

GDP is just a partial measure of flow. There are lots of changes to the stock of a nation, its capital, that are not captured by GDP.

Destruction of assets in natural disasters isn't recognised as a loss in GDP. It gets worse: the rebuilding would actually be a positive on GDP. NB any loss in economic output from, say, destruction of factories, would appear as a negative on GDP - the loss of the factory's output.

Changes in natural capital aren't captured either.

GDP is just a measure of volume of transactions. It gets misused as a proxy for economic wellbeing. That's not the indicator's fault, it's the fault of those who misuse it.

share|improve this answer
    
Could you not simply claim that amortization was higher than normal in the year of the disaster and lower the net value of investment? – denesp Jan 17 at 20:02
    
Hmm, can you explain "rebuilding would actually be a positive on GDP"? This seems to assume use of new credit, otherwise rebuilding would be paid by existing income I think. – sevo Jan 17 at 20:13

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.