The Cross of Gold: Brazilian Treasure and the Decline of Portugal
Davis Kedrosky and
CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)
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 Europeâ€™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 Portugalâ€™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)
New Economics Papers: this item is included in nep-fdg, nep-gro, nep-his, nep-isf and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:cge:wacage:574
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