The cross of gold: Brazilian treasure and the decline of Portugal

As late as 1750, Portugal had a high output per head by Western European standards. Yet just a century later, Portugal was this region'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 in the long-run development of Portugal. The country suffered from an economic and political resource curse. A counterfactual based on synthetic control methods suggests that by 1800 Portugal's GDP per capita was 40 percent lower than it would have been without its endowment of Brazilian gold.