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The Cross of Gold: Brazilian Treasure and the Decline of Portugal

Davis Kedrosky and Nuno Palma

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: As late as 1750, Portugal had an output per head considerably higher than those of France or Spain. Yet just a century later, Portugal was Western Europe’s poorest country. In this paper we show that the discovery of massive quantities of gold in Brazil over the eighteenth century played a key role for the long-run development of Portugal’s economy. We focus on the economic resource curse: the loss of competitiveness of the tradables sector manifested in the rise of the price of non-traded goods relative to traded imports. Using original price data from archives for four Portuguese regions between 1650 and 1800, we show that a real exchange rate appreciation of about 30 percent occurred during the eighteenth century, which led to a loss of the competitiveness of national industry from which the country did not recover until considerably later.

Keywords: Dutch Disease; resource curse; early modern Portugal; the Little Divergence JEL Classification: N10, N13, N50, N53, N73 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-his, nep-isf and nep-opm
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Citations: View citations in EconPapers (5) Track citations by RSS feed

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Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:574

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