Growth in a Protected Environment

From 1850 to 1913, the Portuguese economy expanded slowly and diverged from the European core. Contrarily, in the interwar period, Portugal achieved higher growth and partially caught-up to the levels of labour productivity of Western Europe. Higher growth in Portugal after World War I occurred in a framework of protection and increasing levels of state intervention. Growth was due to structural changes that favoured sectors with higher levels of factor productivity. Such changes were associated with growth in domestic demand and higher levels of investment, and were helped by sustained export levels, the continuation of essential imports and the restoration of capital inflows