The Impact of Natural Disasters on Construction Costs: Identifying Trends

Major natural disasters can and do have critical economic impacts. Although the most severe economic impacts appear to be short-lived, disasters also appear to have longer lasting consequences affecting economic development and growth. These negative economic changes reach beyond the communities directly affected by natural hazards. Current trends in globalization have made societies much more dependent on services such as transportation, gas, electricity, and water. Failures of these services can and do have considerable consequences for people in areas not directly affected by a natural disaster. Such failures of services are known as indirect losses of natural disasters, or losses resulting from the consequences of physical destruction. These indirect losses, which include changes in economic flow, have not been measured, studied, and modeled to the same extent as direct losses (physical damage). This article serves to identify trends in the impact of natural disaster on construction rebuilding costs as a direct result of changes in economic flow. An analysis of the general direct effects of disaster on existing infrastructure versus indirect effects of disaster and their impact on recovery efforts and risk management will be made. Economic changes resulting from supply and demand will be analyzed and suggestions will be made for the monitoring and mitigation of future natural disasters.