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American Treasure and the Decline of Spain

Carlos J. Charotti, Nuno Palma and João Pereira Dos Santos ()

Economics Discussion Paper Series from Economics, The University of Manchester

Abstract: Spain was one of the world's richest countries and a first-rank European power around 1500. Two centuries later it was a backwater. In this paper, we study the long-run impact of the influx of silver from the New World since 1500 for the economic development of Spain. Compared with a synthetic counterfactual, the price level in Spain increased by up to 200% more by the mid-seventeenth century. Spain's GDP per capita outperformed other European nations for around a century: by 1600, it was close to 40% higher than in its counterfactual. However, this effect was reversed in the following 150 years: by 1750, GDP per capita was 40% lower than it would have been if Spain had not been the first-wave receiver of the American treasure.

Keywords: Resource Curse; Dutch Disease; State Capture; Early Modern Spain; Augmented Synthetic Control (search for similar items in EconPapers)
JEL-codes: N13 O11 O57 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-fdg, nep-gro and nep-his
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