CHERRY Discussion Paper Series CHERRY DP 03/06 The Opportunity of a Disaster: The Economic Impact of the 1755 Lisbon Earthquake ALVARO S. PEREIRA 1 The Opportunity of a Disaster The Economic Impact of the 1755 Lisbon Earthquake Alvaro S. Pereira Department of Economics University of York York, YO10 5DD United Kingdom
[email protected] Abstract By combining new archival and existing data, this paper provides estimates of the economic impact of the 1755 Lisbon earthquake, the largest ever-recorded natural catastrophe in Europe. The direct cost of the earthquake is estimated to be between 32 and 48 percent of the Portuguese GDP. In spite of strict controls, prices and wages remained volatile in the years after the tragedy. The recovery from earthquake also led to a rise in the wage premium of construction workers. More significantly, the earthquake became an opportunity for economic reform and to reduce the economic semi-dependency vis-à-vis Britain. JEL Codes: N13, Q54, O52 Keywords: Lisbon 1755 earthquake; natural disasters, economic development 2 1. Introduction “Sometimes miracles are necessary, natural phenomena, or great disasters in order to shake, to awaken, and to open the eyes of misled nations about their interests, [nations] oppressed by others that simulate friendship, and reciprocal interest. Portugal needed the earthquake to open her eyes, and to little by little escape from slavery and total ruin1.” In the early hours of November 1, 1755, the pious population of Lisbon was attending the celebrations of All Saints Day when a powerful earthquake violently shook the western and southern parts of the country.