The Opportunity of a Disaster: The Economic Impact of the 1755 Lisbon Earthquake

By combining new archival and existing data, this article provides estimates of the economic impact of the 1755 Lisbon earthquake, the largest natural catastrophe ever recorded 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 the earthquake also led to a rise in the wage premium of construction workers. More significantly, the earthquake became an opportunity to reform the economy and to reduce the economic semi-dependency vis-à-vis Britain.