Each province has an Economy rating from 1-10. Standard provinces have a max 5 Economy; Harbors max 7, and Capitols max 10. The player may invest gold to increase a province's Economy. In that regard, different races favor different terrains. Elves may increase Forests relatively easily, Humans are better in Plains, Dwarves are better in Mountain, Orcs are better in Wasteland/Hill, and Undead are better in Swamp/Wasteland.
Province Economies may be damaged by war, spells, or The Plague! A Plague may erupt in damaged war-torn provinces that have not been repaired for a time. Undead are immune to the effects of the Plague; they like war torn ravaged areas.
An important consideration is the Province Economy rating vs. a Province's actual Gold contribution to your Treasury. Actual gold is calculated based on the travel distance from the taxed province to the Capitol. Nearby provinces and provinces connected by roads or easy Plains contribute full Gold values. Distant provinces, and provinces that are intersected by rough terrain take a lot more effort to transport that Gold. They contribute less Gold to the treasury. All the player needs to worry about is actual Gold in treasury, but the end result is that large, far-flung Empires must meet new challenges inherent to the inefficiency of their transport system. This is the age of horse and wagon.
Sovereignty also allows you to establish Trade Routes. The game mechanic for Trade Routes grant your Realm a specific global bonus, rather increasing a specific resource pool. For example, if you're importing Lumber, your naval units are cheaper to produce. If you're importing Beer, your Standard Units have higher Morale.
The final element to Economy lies in Realm Spells. The game has a number of Spells that allow players to modify Economy. Mercantile style realms will tend to have a number of Economy-modifying spells. For example, Dwarven Steamworks increases the Economy of Mountain and Hill provinces, while Spoilage targets Trade Routes, costing trade partners Gold.
Good Hunting!
Breca