Long-term barriers to growth

Enrico Spolaore, Romain Wacziarg, 3 October 2013

There is now widespread agreement that ‘deep’ history matters for comparative development. Recent research has shown that ancestry – the transmission of genetic and cultural traits across generations – matters more than the history of geographic regions. This column argues that long-term divergences in inherited traits can create barriers to the diffusion of technology. The greater a population’s genetic distance to the population on the technological frontier, the lower its relative income will be. Development policies should aim at reducing barriers to exchange and communication.

Students of comparative development have turned their focus to factors rooted deeper and deeper in history.

• There is growing agreement that human and geographic factors inherited from eras as far removed as the Neolithic period still influence the wealth of nations today.
• An early example of this hypothesis was Jared Diamond’s book Guns, Germs and Steel (1997), where he argued that geographic advantages from early human history still affect prosperity today.

Economists no longer focus exclusively on the proximate determinants of growth, such as capital accumulation or technology – they now study deeper causes rooted in long-term history. The debate today is not whether deep history matters, but why and through which mechanisms it operates to affect current outcomes.

Ancestors matter, but why? 

An important insight from the recent empirical literature is that the history of populations is a much stronger predictor of current economic outcomes than the history of geographical locations. For example:

• A long familiarity with organised modes of government and a long exposure to agriculture are good for economic development. But it is the history of a population that matters – more than the population’s location. The US is rich today because of the historical heritage of its European colonisers. 

The deep history of North America matters much less (Putterman and Weil 2010; Comin, Easterly and Gong 2010).

• The reversal of fortune – documented by Acemoglu, Johnson and Robinson (2002) at the level of geographic locations for former colonies – disappears when correcting for ancestry and expanding the sample beyond former colonies (Spolaore and Wacziarg 2013a; Chanda, Cook and Putterman 2013). 

This once more suggests that development can be accounted for by factors that are transmitted from generation to generation.

A closely related literature argues that geography and biology affect current development because of long-term indirect effects, transmitted from one generation to the next, and going back to prehistoric times (Diamond 1997; Olsson and Hibbs 2005; Ashraf and Galor 2011, 2013).

Even though Jared Diamond’s well-known book Guns, Germs and Steel is often presented as a purely ‘geographic’ interpretation of comparative development, at its core is the historical transmission of biogeographic advantage – such as agricultural knowledge and resistance to germs – across generations. According to Diamond, early inhabitants of Eurasia passed those advantages on to their descendants, who then moved to dominate large parts of the rest of the world.

Lots more good stuff here.

In the comments to Alex Tabarrok's post at Marginal Revolution, I ask:

Steve Sailer October 7, 2013 at 4:46 pm 

It would be interesting to compare genetic distance to language distance. Does genetic distance provide us any retrospective predictive power that language distance does not? The two measures correlate positively, but there are a number of interesting test cases where they are strikingly divergent, such as Hungary, Finland, and Basque country.

And Dr. Spolaore, one of the co-authors, replies:

Enrico Spolaore October 7, 2013 at 7:05 pm 

Good question. In our article “The Diffusion of Development” (QJE, May 2009), Romain Wacziarg and I discuss the relation between genetic distance and linguistic distance, and study the effect of relative genetic distance on income differences when controlling for measures of linguistic distance (and religious distance) (pp. 504-514). We conclude (p. 512): “In summary, using the best available measures of linguistic and religious distance, the effect of genetic distance on income differences is reduced by about 12%, but the effect remains large and significant. Overall, these results are consistent with our interpretation: when we measure some specific differences in vertically transmitted traits, such as in language or religion, we obtain a reduction in the size of the coefficient on genetic distance, suggesting that genetic distance was capturing some of the barrier effects associated with differences in these vertical characteristics. However, the reduction is not large enough to suggest that genetic distance only captures the effect of linguistic and religious distance. On the contrary, the reduction is relatively modest, and the effect of genetic distance remains large and significant even when controlling for linguistic and religious distance. This suggests that language and religion are but two of the many vertical characteristics that differ across populations, and perhaps not the most important barriers to the diffusion of economic development.”