WP2 Indirect costs

Natural hazards cause very different types of losses. In particular, they affect both stocks and fluxes. They affect stocks by destroying productive capital, buildings, infrastructure and inventories. These stock effects correspond to what is referred to as “direct economic losses,” measured as a replacement or repair value of damaged assets. Disasters also affect fluxes by perturbing or even impairing economic activity and by reducing production capacity. This flux effect is what is referred to as “indirect losses,” measured as reduction in economic output. This workpackage investigates the various methodologies to assess indirect economic losses. It will present and compare the various economic approaches that exist in the literature, and identify the most promising lines of research to improve our ability to understand, assess, and reduce natural disaster indirect losses.