How Deep Are the Roots of Economic Development?
Enrico Spolaore
Tufts University,
NBER and CESIfo
Romain Wacziarg
UCLA,
NBER and CEPR
In order to illustrate the main empirical findings of the contributions discussed herein, we punctuate this paper with our own empirical results based on a unified dataset, regression methodology and sample. This analysis is not meant to be an exhaustive recapitulation of existing results, but simply to illustrate some important milestones in the recent literature. We use, alternately, log per capita income in 2005 (from the Penn World Tables version 6.3) as a measure of contemporary economic performance, and population density in 1500 (from Colin McEvedy and Richard Jones, 1978) as a measure of economic performance in 1500, and regress these on a variety of proposed determinants of development, starting here with geographic factors.
Table 1, column 1 shows that a small set of geographic variables (absolute latitude [i.e., the distance from the equator, e.g., New Zealand has a similar absolute latitude as Oregon], the percentage of a country's land area located in tropical climates, a landlocked country dummy, an island country dummy) can jointly account for 44% [r = 0.66] of contemporary variation in log per capita income, with quantitatively the largest effect coming from absolute latitude (excluding latitude causes the R2 to fall to 0:29 [r = 0.54]). This result captures the flavor of the above-cited literature documenting a strong correlation between geography and income per capita.
Thus, in the 21st Century, the Nordic social democracies are at the top of most measures of societal competence. The usual winner in recent years is Norway.
Nor should we assume this is wholly coincidental.
As I mentioned yesterday, Spolaore's analysis is much in line with Michael Hart's 2007 book Understanding Human History
This overall pattern of north conquering south has long been apparent from the historical record—even though northern lands are generally less populous, due to shorter growing seasons....
Hart offers a simple, deliberately reductionist model for explaining this (and much else): Foresight is needed to survive cold winters. So harsher, more northerly climates select for higher average intelligence. And intelligence is useful in war.
Indeed, there is a positive correlation between latitude and the average intelligence of modern countries, as summarized in Richard Lynn's and Tatu Vanhanen's IQ and the Wealth of Nations. (Here's my table listing their data.) In 2006, Lynn found a substantial r = 0.67 correlation between national average IQ and the absolute value of latitude. Similarly, the correlation between IQ and average temperature is r = -0.63.
On the other hand, within continents there often aren't obvious latitude-related IQ disparities. For instance, the IQ differences among most European countries are too small to worry about.
Northerners have tended to be better at organizing on a large scale. This could be related to intelligence, but doesn't have to be. ...
Enough about conquest. What about contributions?
The most productive centers of cultural innovation have tended to move north over the millennia, for example, from the Fertile Crescent to Ancient Greece to Renaissance Northern Italy to Enlightenment Northern Europe. Hart attributes this to agriculture tending to arise first in low-to-medium latitude locations with long growing seasons then spreading northward. In hunter-gatherer economies, every man must hunt. But in farming economies, enough food can be produced to support urban sophisticates.
Unfortunately, this survey paper never mentions the highly relevant Hart.
Speaking of the North, I'm reminded of the story of the Russian peasants in a sleigh pursued by wolves who periodically toss one of their number out to delay the wolves.
