Exogenous Shocks and the Dynamics of City Growth: Evidence from New York

[...]This paper empirically examines the spatial and temporalresponses of the New York City economy to a large, butspatially concentrated, exogenous shock to its capital stock:the terrorist attacks of September 11, 2001. Our focus on thecity’s response allows us to draw inferences about how cityeconomies work, rather than to explore the effects of terrorismon New York or other cities. We utilize data before and after9/11 to study the response because we believe that the size,location, and timing of the shock were unanticipated, andbecause the shock was large enough to create substantialdislocations in the city’s economy. While the actual financiallosses produced by the attacks were not large relative to the sizeof the city’s economy, a major element of the shock was theperception that the city would be in danger of future attacks.[...]