This paper is a product of the Chief Economist of the Sustainable Development Network and so the economics is more advanced. It does so by first explaining why the direct economic cost, that is, the value of what has been damaged or destroyed by the disaster, is an insufficient indicator of disaster seriousness and why estimating indirect losses is crucial to assess the consequences on welfare. The paper describes the main indirect consequences of a disaster and the following reconstruction phase, and discusses the economic mechanisms at play. It proposes a review of available methodologies to assess indirect economic consequences, illustrated with examples from the literature.
You may download the paper here.