The great escape? the contribution of the empire to portugal�s economic growth, 1500�1800

costa, leonor freire; palma, nuno; reis, jeime;

Newly assembledmacroeconomic statistics for early modern Portugal reveal one of Europe�s most vigorous colonial traders but one of its least successful growth records.Was the empire a blessing or a drag to the economy? Using an estimated dynamic model, we conclude that
intercontinental trade had a substantial and increasingly positive impact on economic growth. In the heyday of colonial expansion, eliminating the economic links to empire would have reduced Portugal�s per capita income by at least a fifth. While the empire helped the domestic economy, it was not sufficient to annul the tendency of the latter toward decline in relation to Europe�s advanced core, which began to set in from the seventeenth century onward, but only became definite after 1800. We conclude that the explanation
for Portugal�s long-term backwardness must be sought primarily in domestic conditions.