The Cross of Gold: Brazilian Treasure and the Decline of Portugal (due to the resource curse)

By Davis Kedrosky and Nuno Palma. Published in The Journal of Economic History.

In the book The Economics of Macro Issues which I used as a supplemental text, they mention that Russia has many resources but its per capita income is less than that of Luxembourg which has few resources. The book suggests that the economic system matters more that how many resources a country has. 

"Abstract

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."

Related posts:

The Resource Curse (2018). Excerpt:

"Striking gold or discovering oil would seem to guarantee instant fortune. Instead, it often leads to conflict, corruption and poverty. History is full of examples of countries whose natural-resource wealth led to less economic success. Revenue from extracting raw materials might be mismanaged or embezzled by government officials, or siphoned off by foreign corporations. The bonanza might crowd out investment in other parts of the economy and make goods and services more expensive. And the country’s fiscal and economic fate might hang on volatile global commodity prices, especially for smaller and less diverse economies." 

Economic benefits from mega-events like the Olympics are often overstated (2021). Excerpt:

"The IOC will tend to favor the city that makes the most lavish offer of gleaming new facilities and infrastructure improvements, so the bidding process can give way to a "winner’s curse" effect. The city that wins tends to be the one that overestimated the value of hosting the Olympics the most, and hence the one that went furthest overboard in their bid."