Australia’s Forgotten Copper Mining Boom: Understanding How South Australia Avoided Dutch Disease, 1843-1850

Great Britain established the new colony of South Australia in 1834 and migration from Britain to the colony began in 1836. After six turbulent years, the discovery of two large deposits of copper at Kapunda (1843/1844) and Burra (1844/1845) renewed the colony’s economic prospects. Over the 1845-1850 period, SA supplied 8-9 percent of the world’s copper production. Immigration to SA from Britain soared, with the colony’s population more than tripling between 1844 and 1851. We augment the Beine et al. (2015) model of an economy with a booming resource sector to incorporate endogenous immigration, and use its comparative statics to frame our empirical investigation of the boom’s effects on the export of other traded goods and worker living standards. Using newly developed SA wage and price series for this period, we find modest increases in SA living standards, increases in the export of wool and wheat, and a larger share of the labor force working in the non-traded goods sector. Finally, we conclude that the decision by Governor Grey to force broad ownership of the “monster” Burra mine and the use of rents from the booming sector to subsidize immigration helped SA avoid the corruption and rent-seeking associated with other resource booms.