How Deep Are the Roots of Economic Development?†

Journal of Economic Literature 2013, 51(2), 1–45 http://dx.doi.org/10.1257/jel.51.2.1

How Deep Are the Roots of Economic Development? †

Enrico Spolaore and Romain Wacziarg*

The empirical literature on economic growth and development has moved from the study of proximate determinants to the analysis of ever deeper, more fundamental factors, rooted in long-term history. A growing body of new empirical work focuses on the measurement and estimation of the effects of historical variables on contemporary income by explicitly taking into account the ancestral composition of current populations. The evidence suggests that economic development is affected by traits that have been transmitted across generations over the very long run. This article surveys this new literature and provides a framework to discuss different channels through which intergenerationally transmitted characteristics may impact economic development, biologically (via genetic or epigenetic transmission) and culturally (via behavioral or symbolic transmission). An important issue is whether historically transmitted traits have affected development through their direct impact on productivity, or have operated indirectly as barriers to the diffusion of productivity- enhancing innovations across populations. (JEL J11, O33, O47, Z13)

“The further backward you look, have evolved over time. Decades ago, the the further forward you can see” emphasis was on the accumulation of fac- (attributed to Winston Churchill).1 tors of production and exogenous technological progress. Later, the focus switched 1. Introduction to policies and incentives endogenously affecting factor accumulation and innova- hy is income per capita higher in tion. More recently, the attention has moved Wsome societies and much lower in to the institutional framework underly- others? Answers to this perennial question ing these policies and incentives. Pushing

* Spolaore: Tufts University, National Bureau of Eco- nomic Research, and CESIfo. Wacziarg: University of California at Los Angeles, National Bureau of Economic Research, and CEPR. We thank Leonardo Bursztyn, Janet 1 This is the usual form of the quote attributed to Currie, Oded Galor, David Weil, and several anonymous Winston Churchill—for instance, by Queen Elizabeth II referees for useful input. in her 1999 Christmas Message. According to Langworth † Go to http://dx.doi.org/10.1257/jel.51.2.1 to visit the (2008, 577), Churchill’s words were “the longer you can article page and view author disclosure statement(s). look back, the farther you can look forward.”

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back the debate one more degree, a key affecting income and productivity over question remains as to why the proximate the long run.2 We review the literature determinants of the wealth of nations vary on the legacy of geographic conditions in across countries. A burgeoning literature section 2. seeks to better understand the deep causes A major theme emerging from the recent of development, rooted in geography and literature is that key human characteristics history. affecting development are transmitted from As the empirical literature has moved one generation to the next within popula- from studying the proximate determi- tions over the long run, explaining why deep nants of growth and development to ana- historical factors still affect outcomes today. lyzing ever deeper, more fundamental A growing body of new empirical work has factors, important questions have arisen: focused on the measurement and estimation How much time persistence is there in of long-term effects of historical variables development outcomes? How far back in on contemporary income by explicitly tak- time should we go in order to understand ing into account the ancestral composition of contemporary economic development? current populations (Spolaore and Wacziarg Through what specific mechanisms do 2009; Putterman and Weil 2010; Comin, long-term geographic and historical fac- Easterly, and Gong 2010; Ashraf and Galor tors affect outcomes today? If economic 2013). We survey contributions to this new development has deep historical roots, literature in section 3. what is the scope for policy to affect the In section 4, we provide a general taxon- wealth of nations? This article discusses omy to discuss different channels through the current state of knowledge on these which inherited human characteristics may issues, focusing on recent empirical work impact economic development. Our discus- shedding light on the complex interactions sion builds on an extensive evolutionary lit- among geography, history, and compara- erature on the complex interactions among tive development. Throughout, we illus- genetic, epigenetic, and cultural transmis- trate the major milestones of the recent sion mechanisms, and on the coevolution of literature in a unified empirical frame- biological and cultural traits (Cavalli-Sforza work for understanding variation in eco- and Feldman 1981; Boyd and Richerson nomic development. 1985; Richerson and Boyd 2005; Jablonka Our starting point is the long-standing and Lamb 2005), as well as on a growing debate on geography and development. literature on cultural transmission and eco- There is no doubt that geographic factors, nomic outcomes (e.g., Bisin and Verdier such as latitude and climate, are highly cor- 2000, 2001; Tabellini 2008, 2009; Alesina, related with development, but the inter- Giuliano, and Nunn 2013). An important pretation of this correlation remains hotly issue is whether historically transmitted debated. While some of the effects of geog- characteristics affect economic development raphy may operate directly on current pro- through their direct impact on productivity, ductivity, there is mounting evidence that or operate indirectly as barriers to the diffu- much of the correlation operates through sion of technological and institutional inno- indirect mechanisms, i.e., through the his- vations across populations. torical effects of initial geographic conditions on the spatial distribution of human 2 For recent discussions of these issues from differ- characteristics, such as institutions, human ent perspectives, see Galor (2005, 2011) and Acemoglu, capital, social capital, and cultural traits, Johnson, and Robinson (2005).

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2. Geography and Development Table 1, column 1 shows that a small set of geographic variables (absolute latitude, the 2.1 Long-Term Effects of Geography percentage of a country’s land area located in tropical climates, a landlocked coun- The hypothesis that geographic factors try dummy, an island country dummy) can affect productivity and economic develop- jointly account for 44 percent of contempo- ment has a long pedigree, going back to rary variation in log per capita income, with Machiavelli (1531), Montesquieu (1748), and quantitatively the largest effect coming from Marshall (1890). A vast empirical literature absolute latitude (excluding latitude causes has documented high correlations between the R2 to fall to 0.29). This result captures current levels of income per capita and a the flavor of the above-cited literature docu- series of geographic and biological variables, menting a strong correlation between geog- such as climate and temperature (Myrdal raphy and income per capita. 1968; Kamarck 1976; Masters and McMillan While the correlation between geography 2001; Sachs 2001), the disease environment and development is well established, the (Bloom and Sachs 1998; Sachs, Mellinger, debate has centered around causal mecha- and Gallup 2001; Sachs and Malaney 2002), nisms. A number of prominent economists, natural resources (Sachs and Warner 2001), including Myrdal (1968), Kamarck (1976), and transportation conditions (Rappaport and Sachs and coauthors, argue that geo- and Sachs 2003). graphic factors have a direct, contemporane- In order to illustrate the main empiri- ous effect on productivity and development. cal findings of the contributions discussed In particular, Sachs (2001) claims that eco- herein, we punctuate this paper with our nomic underdevelopment in tropical coun- own empirical results based on a unified data tries can be partly explained by the current set, regression methodology and sample. negative effects of their location, which This analysis is not meant to be an exhaustive include two main ecological handicaps: low recapitulation of existing results, but simply agricultural productivity and a high burden of to illustrate some important milestones in diseases. Tropical soils are depleted by heavy the recent literature. We use, alternately, log rainfall, and crops are attacked by pests and per capita income in 2005 (from the Penn parasites that thrive in hot climates without World Tables version 6.3) as a measure of winter frosts (Masters and McMillan 2001). contemporary economic performance, and Warm climates also favor the transmission of population density in 1500 (from McEvedy tropical diseases borne by insects and bacte- and Jones 1978) as a measure of economic ria, with major effects on health and human performance in 1500, and regress these on a capital. In sum, according to this line of variety of proposed determinants of develop- research, geography has direct current effects ment, starting here with geographic factors.3 on productivity and income per capita. Other scholars, in contrast, claim that 3 As is well known, in the preindustrial, Malthusian geography affects development indirectly era population density is the appropriate measure of a through historical channels, such as the society’s economic performance since any technologi- effects of prehistoric geographic and biological improvement leads to increases in population rather than to increases in per capita income. For a theoretical cal conditions on the onset and spread of agri- and empirical analysis of the relationship between popu- culture and domestication (Diamond 1997; lation size, population density, and long-term growth in Olsson and Hibbs 2005), and the effects Malthusian times, see Kremer (1993). For in-depth discussions of this topic, see Galor (2005) and the recent contri- of crops and germs on the settlement of bution by Ashraf and Galor (2011a). European colonizers after 1500 (Engerman

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Table 1 Geography and Contemporary Development (Dependent variable: log per capita income, 2005; estimator: OLS)

Whole Olsson–Hibbs Olsson–Hibbs Olsson–Hibbs Olsson–Hibbs Old World Sample: World samplea samplea samplea samplea only (1) (2) (3) (4) (5) (6) Absolute latitude 0.044 0.052 (6.645)*** (7.524)*** Percent land area in –0.049 0.209 –0.410 –0.650 –0.421 –0.448 the tropics (0.154) (0.660) (1.595) (2.252)** (1.641) (1.646) Landlocked dummy –0.742 –0.518 –0.499 –0.572 –0.505 –0.226 (4.375)*** (2.687)*** (2.487)** (2.622)** (2.523)** (1.160) Island dummy 0.643 0.306 0.920 0.560 0.952 1.306 (2.496)** (1.033) (3.479)*** (1.996)** (3.425)*** (4.504)*** Geographic conditions 0.706 0.768 0.780 (Olsson–Hibbs)b (6.931)*** (4.739)*** (5.167)*** Biological conditions 0.585 –0.074 0.086 (Olsson–Hibbs)c (4.759)*** (0.483) (0.581) Constant 7.703 7.354 8.745 8.958 8.741 8.438 (25.377)*** (25.360)*** (61.561)*** (58.200)*** (61.352)*** (60.049)*** Observations 155 102 102 102 102 83 Adjusted R2 0.440 0.546 0.521 0.449 0.516 0.641

Notes: a The Olsson and Hibbs sample excludes the neo-European countries (Australia, Canada, New Zealand, and the United States) and countries whose current income is based primarily on extractive wealth (Olsson and Hibbs 2005). b First principal component of number of annual or perennial wild grasses and number of domesticable big mammals (all variables from Olsson and Hibbs 2005) c First principal component of absolute latitude; climate suitability to agriculture; rate of East–West orientation; size of landmass in millions of sq km (all variables from Olsson and Hibbs 2005). Robust t statistics in parentheses. *** Significant at the 1 percent level. ** Significant at the 5 percent level. * Significant at the 10 percent level.

and Sokoloff 1997 and 2002; Acemoglu, in 10,000 BC (the Neolithic Revolution). Johnson, and Robinson 2001, 2002; Easterly These advantages included the larger size and Levine 2003). of Eurasia, its initial biological conditions Diamond (1997) famously argues that the (the diversity of animals and plants avail- roots of comparative development lie in a able for domestication in prehistoric times), series of environmental advantages enjoyed and its East–West orientation, which facili- by the inhabitants of Eurasia at the transition tated the spread of agricultural innovations. from a hunter–gatherer economy to agricul- Building on these geographic advantages, tural and pastoral production, starting roughly Eurasia experienced a population explosion

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and an earlier acceleration of technological Columns 3–5 add the two main Olsson– innovation, with long-term consequences Hibbs geographic variables, first separately for comparative development. According to and then jointly: a summary measure of bio- Diamond, the proximate determinants of logical conditions and a summary measure European economic and political success of geographic conditions.5 Both geographic (“guns, germs, and steel”) were therefore and biological conditions variables are highly the outcomes of deeper geographic advan- significant when entered separately. When tages that operated in prehistoric times. The entered jointly, the geographic conditions descendants of some Eurasian populations variable remains highly significant and the (Europeans), building on their Neolithic overall explanatory power of the regressors advantage, were able to use their technologi- remains large (52 percent). These empirical lead (guns and steel) and their immunity cal results provide strong evidence in favor to old-world diseases (germs) to dominate of Diamond’s hypotheses, while suggesting other regions in modern times—including that the geographic component of the story regions that did not enjoy the original geo- is empirically more relevant than the bio- graphic advantages of Eurasia. logical component. Column 6 goes further in In order to test Diamond’s hypotheses, the attempt to control for the effect of post- Olsson and Hibbs (2005) provide an empiri- 1500 population movements, by restrict- cal analysis of the relation between initial ing the sample to the Old World (defined biogeographic endowments and contempo- as all countries minus the Americas and rary levels of development.4 They use several Oceania). The effect of geography now rises geographic and biological variables: the size to 64 percent—again highly consistent with of continents, their major directional axis Diamond’s idea that biogeographic condi- (extent of East–West orientation), climatic tions matter mostly in the Old World.6 factors, and initial biological conditions (the number of animals and plants suitable to domestication and cultivation at each location 12,000 years ago). We revisit their 5 These are the first principal components of the empirical results in columns 2 through 5 of above-listed factors. Since latitude is a component of the geographic conditions index, we exclude our measure of table 1. In order to reduce the effect of post- latitude as a separate regressor in the regressions that 1500 population movements, the Olsson– include geographic conditions. Hibbs sample excludes the neo-European 6 Olsson and Hibbs also find that geographic variables continue to be positively and significantly correlated with countries (Australia, Canada, New Zealand, income per capita when they control for measures of the and the United States), as well as countries political and institutional environment. They show that whose current income is based primarily on such political and institutional measures are positively correlated with geographic and biogeographic conditions, extractive wealth. Column 2 replicates the consistent with the idea that institutions could mediate the estimates of column 1 using this restricted link between geography and development. As they notice sample—the joint explanatory power of geo- (934), controlling for political–institutional variables raises well-known issues of endogeneity and reverse causality (for graphic variables rises to 55 percent, since instance, richer countries can have the resources and abil- the new sample excludes regions that are ity to build better institutions). They write: “Researchers rich today as a result of the guns, germs, and have struggled with the joint endogeneity issue, proposing various instrumental variables to obtain consistent esti- steel of colonizing Europeans rather than mates of the proximate effects of politics and institutions purely geographic factors. on economic performance, along with the related question of how much influence, if any, natural endowments exert on economic development independent of institutional development. None of these attempts is entirely persuasive 4 See also Hibbs and Olsson (2004). in our view.” We return to these important issues below.

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2.2 The Legacy of the Neolithic Transition for 70 percent of the variation in the date of adoption of agriculture, and most enter with The long-term effects of geographic and a highly significant coefficient. Column 2 biogeographic endowments also play a cen- shows the reduced form—again, geographic tral role in the analysis of Ashraf and Galor factors account for 44 percent of the varia- (2011a). While their main goal is to test a tion in population density in 1500, consistent central tenet of Malthusian theory (that with the results of table 1 for the contempo- per capita income gains from technologi- rary period.8 cal improvements in the preindustrial era Ashraf and Galor (2011a) argue that, while were largely dissipated through population geographic factors may have continued growth), their approach leads them to pro- to affect economic development after the vide further evidence relating to Diamond’s introduction of agriculture, the availability hypotheses and the legacy of geography. of prehistoric domesticable wild plant and Ashraf and Galor demonstrate that the animal species did not influence population spread of agriculture (the Neolithic transi- density in the past two millennia other than tion) was driven by geographic conditions through the timing of the Neolithic transi- (climate, continental size and orientation) tion. Therefore, they use these variables, and biogeographic conditions (the availabil- obtained from the Olsson and Hibbs (2005) ity of domesticable plant and big mammal data set, as instruments to estimate the effect species). They empirically document how of the timing of the Neolithic transition on geographic factors influenced the timing of population density. The results of column 3 the agricultural transition. They also show (OLS) and column 4 (IV) of table 2 illustrate that biogeographic variables, consistent their findings: years since the agricultural with Olsson and Hibbs (2005), are strongly transition has a strong, statistically significant correlated with population density in 1500, positive effect on population density in 1500. but argue that the only way these variables Interestingly, the IV effect is quantitatively matter for economic performance in pre- larger than the OLS estimate.9 The magni- industrial times is through their effect on the tude of the effect is large, as a one standard timing of the adoption of agriculture. This paves the way to using biogeographic factors as instruments for the timing of the Neolithic 8 Interestingly, the effect of latitude is negative. Ashraf transition in a specification explaining popu- and Galor (2011a) indeed observe that: “in contrast to the positive relationship between absolute latitude and con- lation density in 1500. temporary income per capita, population density in pre- Table 2 illustrates these findings in our industrial times was on average higher at latitudinal bands unified empirical setup. In column 1, we closer to the equator.” Thus, the effects of geographic factors have varied over different periods of technologi- regressed the number of years since the cal development, in line with the idea that the effects of Neolithic transition (obtained from Chanda geography on development are indirect. and Putterman 2007) on a set of geographic 9 Ashraf and Galor (2011a) argue that, in regressions of this type: “reverse causality is not a source of concern, (. . .) variables—i.e., this is the first stage regres- [but] the OLS estimates of the effect of the time elapsed 7 sion. These geographic conditions account since the transition to agriculture may suffer from omitted variable bias (. . .)” (2016). The sign of the expected OLS bias therefore depends on the pattern of correlations 7 For comparability we use the same set of variables as between the omitted factors, the dependent variables above, except instead of the Olsson–Hibbs summary indi- and the included regressors. Finding an IV effect that is ces of geographic and biological conditions, we directly larger than the OLS effect is also broadly consistent with include the number of annual or perennial wild grasses and IV partly addressing measurement error in years since the the number of domesticable big mammals, so as to main- agricultural transition, although care must be exercised tain consistency with Ashraf and Galor (2011a). with this inference in the multivariate context.

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Table 2 Geography and Development in 1500 AD

Years since agricultural Population Population Population Dependent Variable: transition density in 1500 density in 1500 density in 1500 Estimator: OLS OLS OLS IV

(1) (2) (3) (4)

Absolute latitude –0.074 –0.022 0.027 0.020 (3.637)*** (1.411) (2.373)** (1.872)* Percent land area in the tropics –1.052 0.997 1.464 1.636 (2.356)** (2.291)** (3.312)*** (3.789)*** Landlocked dummy –0.585 0.384 0.532 0.702 (2.306)** (1.332) (1.616) (2.158)** Island dummy –1.085 0.072 0.391 0.508 (3.699)*** (0.188) (0.993) (1.254) Number of annual or 0.017 0.030 perennial wild grasses (0.642) (1.105) Number of domesticable 0.554 0.258 big mammals (8.349)*** (3.129)*** Years since agricultural transition 0.426 0.584 (6.694)*** (6.887)*** Constant 4.657 –0.164 –2.159 –2.814 (9.069)*** (0.379) (4.421)*** (5.463)*** Observations 100 100 98 98 Adjusted R2 0.707 0.439 0.393 —

Notes: Robust t statistics in parentheses. *** Significant at the 1 percent level. ** Significant at the 5 percent level. * Significant at the 10 percent level.

deviation change in years of agriculture is preindustrial societies, the results in Ashraf associated with 63 percent of a standard and Galor (2011a), as summarized in table deviation change in log population density 2, add an important qualifier to the Olsson in 1500 (OLS). The corresponding standard- and Hibbs (2005) results. They show, not ized beta coefficient using IV is 88 percent. only that an earlier onset of the Neolithic All of the other regressors feature much transition contributed to the level of tech- smaller standardized effects. nological sophistication in the preindustrial In addition to providing strong support world, but also that the effect of Diamond’s in favor of the Malthusian view that tech- biogeographic factors may well operate nological improvements impact popula- through the legacy of an early exposure to tion density but not per capita income in agriculture.

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2.3 Reversal of Fortune and the Role of development” (11). We return to these Institutions important questions below. Acemoglu, Johnson, and Robinson (2002) Diamond’s book, as well as the empirical address the issue of whether geography may work by Olsson and Hibbs and Ashraf and have had a direct effect on development by Galor, suggests an important role for geog- documenting a “reversal of fortune” among raphy and biogeography in the onset and former European colonies. This reversal of diffusion of economic development over fortune suggests that the effect of geogra- the past millennia. However, these analy- phy was indirect. The simplest geography ses leave open the question of whether the story states that some geographic features effects of geography operate only through are conducive to development, but this story their historical legacy, or also affect contem- is inconsistent with the reversal of fortune poraneous income and productivity directly. since the same geographic features that Nunn (2009) makes a closely related point made a society rich in 1500 should presum- when discussing Nunn and Puga (2007), an ably make it rich today.10 More sophisticated attempt to estimate the magnitude of direct geography-centered arguments rely on the and indirect (historical) effects of a specific idea that geographic features conducive to geographic characteristic: terrain rugged- development vary depending on the time ness, measured by the average absolute slope period. A reversal of fortune would be con- of a region’s surface area. Nunn and Puga sistent with nonpersistent direct effects of (2007) argue that ruggedness has a negative geography on productivity: features of geog- direct effect on agriculture, construction, raphy that had positive effects on productiv- and trade, but a positive historical effect ity in the past could have become a handicap within Africa because it allowed protection in more recent times. However, such shifts from slave traders. They find that the histori- would then have to be explained by specific cal (indirect) positive effect is twice as large changes in nongeographic factors (e.g., a as the negative (direct) contemporary effect. technological revolution). A broader issue with Diamond’s geo- To proxy for levels of economic produc- graphic explanation is that it denies a role tivity and prosperity in a Malthusian world, for specific differences between populations, Acemoglu, Johnson, and Robinson (2002) especially within Eurasia itself. For example, use data on urbanization patterns and popu- Appleby (2010) writes: “How deep are the lation density. Contemporary income per roots of capitalism? [ . . . ] Jared Diamond capita is regressed on these measures of wrote a best-selling study that emphasized economic performance in 1500 to assess the geographic and biological advantages whether a reversal of fortune has occurred. the West enjoyed. Two central problems The bottom panel of table 3 mirrors their vex this interpretation: The advantages of main results: in various samples that all the West were enjoyed by all of Europe, but exclude European countries, the relationship only England experienced the breakthrough between population density in 1500 and log that others had to imitate to become capi- talistic. Diamond’s emphasis on physical fac- 10 Acemoglu, Johnson, and Robinson (2002) state that: tors also implies that they can account for “The simplest version of the geography hypothesis empha- the specific historical events that brought sizes the time-invariant effects of geographic variables, on Western modernity without reference such as climate and disease, on work effort and productivity, and therefore predicts that nations and areas that were to the individuals, ideas, and institutions relatively rich in 1500 should also be relatively prosperous that played so central a part in this historic today” (1233).

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per capita income in 2005 is negative. In the This line of research is part of a body of regression that corresponds to their baseline historical and empirical work emphasizing (column 3), looking only at former European institutional differences across societies, colonies, the effect is large in magnitude and including seminal contributions by North highly significant statistically: the standard- and Thomas (1973), North (1981, 1990), and ized beta on 1500 density is 48 percent and Jones (1988), and more recently Engerman the t-statistic is 7. Similar results hold for the and Sokoloff (1997, 2002), Sokoloff and whole World minus Europe (column 1), and Engerman (2000), and Acemoglu, Johnson, also when restricting attention only to coun- and Robinson (2001, 2002, 2005). In particu- tries not currently populated by more than lar, Engerman and Sokoloff (1997) provide a 50 percent of their indigenous population path-breaking investigation of the interplay (columns 5 and 7).11 These important find- between geographic and historical factors in ings suggest that the observed correlation explaining differential growth performance between geographic variables and income in the Americas (United States and Canada per capita are unlikely to stem from direct versus Latin America). They point out that effects of geography on productivity. In con- Latin American societies also began with trast, they point to indirect effects of geogra- vast supplies of land and natural resources phy operating through long-term changes in per capita, and “were among the most pros- nongeographic variables. perous and coveted of the colonies in the Acemoglu, Johnson, and Robinson (2002) seventeenth and eighteenth century. Indeed, argue that the reversal reflects changes in so promising were these other regions, that the institutions resulting from European Europeans of the time generally regarded colonialism: Europeans were more likely to the thirteen British colonies of the North introduce institutions encouraging invest- American mainland and Canada as of rela- ment in regions with low population density tively marginal economic interest—an opin- and low urbanization, while they introduced ion evidently shared by Native Americans extractive, investment-depressing institu- who had concentrated disproportionally in tions in richer regions. This interpretation the areas the Spanish eventually developed. is consistent with Acemoglu, Johnson, and Yet, despite their similar, if not less favorable, Robinson (2001), where the focus is on an factor endowment, the U.S. and Canada ulti- indirect biogeographic channel: European mately proved to be far more successful than settlers introduced good (productivity- the other colonies in realizing sustained eco- enhancing) institutions in regions where they nomic growth over time. This stark contrast faced favorable biogeographic conditions in performance suggests that factor endow- (low mortality rates), and bad institutions ment alone cannot explain the diversity of in regions where they faced unfavorable outcomes” (Engerman and Sokoloff 1997, biogeographic conditions (high mortality 260). Their central hypothesis was that dif- rates).12 ferences in factor endowments across New World colonies played a key role in explaining different growth patterns after 1800, but that those effects were indirect. Different 11 To define whether a country’s population today is composed of more than 50 percent of descendents of its factor endowments created “substantial dif- 1500 population we rely on the World Migration Matrix ferences in the degree of inequality in wealth, of Putterman and Weil (2010), which we discuss in much greater detail in section 3. 12 For a critical reassessment of the empirical strategy (2012). See Acemoglu, Johnson, and Robinson (2012) for in Acemoglu, Johnson, and Robinson (2001), see Albouy a reply.

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Table 3 Reversal of Fortune (Dependent variable: log per capita income, 2005; estimator: OLS)

Not Former Former Former Former European European Whole Europe European European Non colony, Non Colony, Sample: World Only Colony Colony Indigenous Indigenous Indigenous Indigenous (1) (2) (3) (4) (5) (6) (7) (8)

With European Countries

Log of 0.027 0.117 0.170 0.193 population (0.389) (1.276) b (2.045)** b (2.385)** b b density, year 1500 Beta coeffi- 3.26% 22.76% 22.34% 20.00% cient on 1500 density Observations 171 35 73 138 R2 0.001 0.052 0.050 0.040

Without European Countries

Log of –0.246 –0.393 –0.030 –0.232 –0.117 –0.371 –0.232 population (3.304)*** a (7.093)*** (0.184) (2.045)** (1.112) (4.027)*** (2.740)** density, year 1500 Beta coeffi- –27.77% –47.88% –3.08% –32.81% –11.72% –51.69% –26.19% cient on 1500 density Observations 136 98 38 33 103 28 70 R2 0.077 0.229 0.001 0.108 0.014 0.267 0.069

Notes: All regressions include a constant term (estimates not reported). Robust t statistics in parentheses. *** Significant at the 1 percent level. ** Significant at the 5 percent level. * Significant at the 10 percent level. a Empty sample. b No European countries in sample, regression results identical to those in the bottom panel.

human capital, and political power,” which, value and economies of scale ended up with in turn, were embodied in persistent societal unequal slave economies in the hands of a traits and institutions. Societies that were small elite, implementing policies and insti- endowed with climate and soil conditions tutions that perpetuated such inequality, well-suited for growing sugar, coffee, rice, lowering incentives for investment and inno- tobacco, and other crops with high market vation. In contrast, a more equal distribution

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of wealth and power emerged in societies after the discovery of the New World, and with small-scale crops (grain and livestock), now constitute large portions of these coun- with beneficial consequences for long-term tries’ populations—either European coloniz- economic performance. ers (e.g., in North America and Oceania) or An alternative to the institutional explana- African slaves (e.g., in the Caribbean). tion for the reversal of fortune is rooted in These regularities suggest that the broader the composition of world populations. For features of a population, rather than institu- while Europeans may have left good institutions only, might account for the pattern of tions in former colonies that are rich today, persistence and change in the relative eco- they also brought themselves there. This nomic performance of countries through point is stressed by Glaeser et al. (2004), who history. Of course, the quality of institutions write: “[Acemoglu, Johnson, and Robinson’s] might be one of the features of a population results do not establish a role for institutions. (perhaps not the only feature) that makes it Specifically, the Europeans who settled in the more or less susceptible to economic success, New World may have brought with them not but the basic lesson from table 3 is that one so much their institutions, but themselves, cannot abstract from the ancestral structure that is, their human capital. This theoretical of populations when trying to understand ambiguity is consistent with the empirical comparative development. This central idea evidence as well” (274). is the subject of sections 3 and 4, so we will The top panel of table 3 shows that when say little more for now. Europe is included in the sample, any evi- Recent work casts additional doubt on dence for reversals of fortune disappears: the view that national institutions are para- the coefficient on 1500 population density is mount. In a paper on African development, essentially zero for the broadest sample that Michalopoulos and Papaioannou (2010) find includes the whole world (column 1). For that national institutions have little effect countries that were not former European when one looks at the economic performance colonies, there is strong evidence of persis- of homogeneous ethnic groups divided by tence, with a positive significant coefficient national borders. They examine the effects on 1500 density. The evidence of persistence on comparative development of national is even stronger when looking at countries contemporary institutions structures and that are populated mostly by their indigenous ethnicity-specific precolonial societal traits, populations (the evidence is yet stronger using a methodological approach that com- when defining “indigenous” countries more bines anthropological data on the spatial dis- strictly, for instance requiring that more than tribution of ethnicities before colonization, 90 percent of the population be descended historical information on ethnic cultural and from those who inhabited the country in institutional traits, and contemporary light 1500).13 In other words, the reversal of density image data from satellites as a proxy fortune is a feature of samples that exclude of regional development. Overall, their find- Europe and is driven largely by countries ings suggest that long-term features of popu- inhabited by populations that moved there lations, rather than institutions in isolation,

13 The R2 we obtain in the regressions of table 3 are commensurate in magnitude to those obtained from com- the R2 falls. In general, R 2 s are quite low because we are parable specifications in Acemoglu, Johnson, and Robinson regressing two different measures of development on each (2002). As expected, as the sample expands beyond former other (per capita income and population density in 1500), European colonies, the explanatory power of past develop- and both variables (particularly historical population den- ment for current development falls, and correspondingly sity) are measured with significant amounts of error.

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play a central role in explaining comparative such as by Guglielmino et al. (1995), show- economic success.14 ing in the case of Africa that cultural traits In sum, the evidence on reversal of for- are transmitted intergenerationally and bear tune documented by Acemoglu, Johnson, only a weak correlation with environmental and Robinson (2002) is consistent with an characteristics: “Most traits examined, in indirect rather than direct effect of geogra- particular those affecting family structure phy on development, but is open to alterna- and kinship, showed great conservation over tive interpretations about the mechanisms generations. They are most probably trans- of transmission. A key issue is whether the mitted by family members.” differential settlement of Europeans across colonies after 1500 affect current income in 3. Development and the Long-Term former colonies exclusively through institu- History of Populations tions, as argued by Acemoglu, Johnson, and Robinson (2001, 2002, 2005), or through 3.1 Adjusting for Ancestry other relevant factors and traits brought by Europeans, such as human capital (Glaeser Historical population movements play et al. 2004) or culture (Landes 1998). a central role in the debate regarding the Disentangling the effects of specific soci- mechanism linking geography and economic etal characteristics, such as different aspects development, as well as the interpretation of institutions, values, norms, beliefs, other of reversals of fortune. Recent research has human traits, etc., is intrinsically difficult, focused on the measurement and estimation because these variables are conceptually of the long-term effects of historical factors elusive to measure, deeply interlinked, and on contemporary income by explicitly tak- endogenous with respect to economic devel- ing into account the ancestral composition opment. In spite of these intrinsic difficulties, of current populations. We review some of a growing body of historical and empirical these contributions in this section. research, focusing on natural experiments, An important contribution within this line has attempted to provide insights on the of research is Putterman and Weil (2010). complex relationships between geography They examine explicitly whether it is the and human history and their implications for historical legacy of geographic locations comparative development (for example, see or the historical legacy of the populations the contributions in Diamond and Robinson currently inhabiting these locations that 2010). matters more for contemporary outcomes. As we discuss in the next two sections, To do so, they assemble a matrix showing recent contributions stress the importance of the share of the contemporary population persistent characteristics transmitted inter- of each country descended from people in generationally over the long run. This litera- different source countries in the year 1500. ture is consistent with anthropological work, The definition of ancestry is bound to have some degree of arbitrariness, since it refers to ancestral populations at a specific point 14 The effects of ethnic/cultural differences on eco- in time. However, choosing 1500 is sensible nomic outcomes within a common national setting are also documented by Brügger, Lalive, and Zweimüller (2009), since this date occurs prior to the massive who compare different unemployment patterns across the population movements that followed the language barrier in Switzerland, and find that job seekers discovery of the New World, and data on living in Latin-speaking border communities take about 18 percent longer to leave unemployment than their neigh- population movements prior to that date bors in German-speaking communities. are largely unavailable.

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Building on previous work by Bockstette, between historical factors and their ancestry- Chanda, and Putterman (2002) and Chanda adjusted counterparts, because outside the and Putterman (2007), they consider two New World, everyone’s ancestry is largely indicators of early development: early state from their own location. Putterman and Weil history and the number of years since the explore how their two historical variables— adoption of agriculture. They then construct each either ancestry adjusted or not—affect two sets of historical variables, one set repre- the level of income per capita and within- senting the history of the location, the other country income inequality in the world today. set weighted using the migration matrix, Their key finding is that it is not as much representing the same variables as they the past history of locations that matters as pertain not to the location but the contem- it is the history of the ancestor populations. poraneous population inhabiting this loca- Tables 4 and 5 illustrate their approach in tion. Inevitably, measuring these concepts our unified empirical framework. Table 4 is fraught with methodological issues. For starts with simple correlations. The corre- instance, when it comes to state antiquity, lations between state history and years of experience with centralization that occurred agriculture, on the one hand, and per capita in the distant past is discounted exponen- income in 2005, on the other hand, are of the tially, while no discounting is applied to the expected positive signs, but are much larger measure of the years of agriculture. While when ancestry-adjusting—almost doubling these measurement choices will surely lead in magnitude. These results are confirmed in to future refinements, it is the comparison the regressions of table 5. In these regres- between the estimates obtained when look- sions, we start from the specification that ing at the history of locations rather than pop- controls for the baseline set of four geo- ulations that leads to interesting inferences. graphic variables, and add the Putterman According to this approach, the United and Weil variables one by one, either ances- States has had a relatively short exposure try-adjusted or not. The variables represent- to state centralization in terms of location, ing the history of the locations enter with an but once ancestry-adjusted it features a insignificant coefficient (columns 1 and 3), longer familiarity with state centralization, while the ancestry-adjusted variables enter since the current inhabitants of the United with positive, statistically significant coef- States are mostly descended from Eurasian ficients (columns 2 and 4). A one standard populations that have had a long history of deviation change in ancestry-adjusted years centralized state institutions.15 Clearly, in of agriculture can account for 17 percent of a this work the New World plays a big role in standard deviation of log per capita income, identifying the difference in the coefficients

15 Germany and Italy, two countries from which many as the Republic of Venice and Prussia), however, Italy and ancestors of current Americans originate, have fluctuated Germany do not display state antiquity indices that are over their histories between fractured and unified states. that different from other European countries. The United For instance, Italy was a unified country under the Roman States overall has a state antiquity index roughly commen- Empire, but a collection of city-states and local polities, surate with that of European countries, despite the addi- partly under foreign control, prior to its unification in 1861. tion of populations, for instance descended from Native The index of state antiquity for such cases discounts peri- Americans or African slaves, that may have had limited ods that occurred in the distant past (see http://www.econ. exposure to centralized states. While the measurement brown.edu/fac/louis_putterman/Antiquity%20data%20 of state antiquity can be questioned on several grounds, page.htm for details on the computation of the index). Due there is little doubt that ancestry adjustment implies that to lengthy periods of unification or control of substantial the United States had a longer experience with centralized parts of their territories by domestic regional states (such states than the history of Native Americans would suggest.

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Table 4 Historical Correlates of Development, with and without Ancestry Adjustment

Ancestry Ancestry Log per capita Years of adjusted years State adjusted income 2005 agriculture of agriculture history state history

Years of agriculture 0.228 1.000

Ancestry-adjusted years 0.457 0.817 1.000 of agriculture

State history 0.257 0.618 0.457 1.000

Ancestry-adjusted state history 0.481 0.424 0.613 0.783 1.000

Note: Observations: 139

while the corresponding figure is almost 22 show that a variable capturing the extent of percent for state history. European ancestry accounts for 41 percent To summarize, a long history of central- of the variation in per capita income, a topic ized states as well as an early adoption of to which we turn in the next subsection. agriculture are positively associated with per Putterman and Weil’s results strongly capita income today, after ancestry adjust- suggest that the ultimate drivers of devel- ment.16 Putterman and Weil also find that opment cannot be fully disembodied from the variance of early development history characteristics of human populations. across ancestor populations predicts within- When migrating to the New World, popula- country income inequality better than simple tions brought with them traits that carried measures of ethnic and linguistic heteroge- the seeds of their economic performance. neity. For example, in Latin America, coun- This stands in contrast to views emphasizing tries that are made up of a lot of Europeans the direct effects of geography or the direct along with a lot of Native Americans tend to effects of institutions, for both of these display higher income inequality than coun- characteristics could, in principle, operate tries that are made up mostly of European irrespective of the population to which they descendants. Finally, to further elucidate apply. A population’s long familiarity with why correcting for ancestry matters, they also certain types of institutions, human capital, norms of behavior or more broadly culture seems important to account for comparative 16 Interestingly, Paik (2010) documents that within development. Europe, an earlier onset of agriculture is negatively correlated with subsequent economic performance after the 3.2 The Role of Europeans Industrial Revolution, contrary to the worldwide results of Putterman and Weil. Paik argues that the mechanism Easterly and Levine (2012) confirm and is cultural: a late adoption of agriculture is associated with individualist values that were conducive to economic suc- expand upon Putterman and Weil’s find- cess in the Industrial era. ing, showing that a large population of

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Table 5 The History of Populations and Economic Development (Dependent variable: log per capita income, 2005; estimator: OLS)

Years of Ancestry-adjusted Ancestry-adjusted Main regressor: agriculture years of agriculture State history state history

(1) (2) (3) (4)

Years of agriculture 0.019 (0.535) Ancestry-adjusted years 0.099 of agriculture (2.347)** State history 0.074 (0.245) Ancestry-adjusted state 1.217 history (3.306)*** Absolute latitude 0.042 0.040 0.047 0.046 (6.120)*** (6.168)*** (7.483)*** (7.313)*** Percent land area in the –0.188 –0.148 0.061 0.269 tropics (0.592) (0.502) (0.200) (0.914) Landlocked dummy –0.753 –0.671 –0.697 –0.555 (4.354)*** (3.847)*** (4.122)*** (3.201)*** Island dummy 0.681 0.562 0.531 0.503 (2.550)** (2.555)** (2.216)** (2.338)** Constant 7.699 7.270 7.458 6.773 (22.429)*** (21.455)*** (22.338)*** (19.539)*** Beta coefficients on the 3.75% 17.23% 1.50% 21.59% bold variable Observations 150 148 136 135 R2 0.475 0.523 0.558 0.588

Notes: Robust t statistics in parentheses. *** Significant at the 1 percent level. ** Significant at the 5 percent level. * Significant at the 10 percent level.

European ancestry confers a strong advan- and restricting the sample to countries tage in development, using new data on where the European share is less than European settlement during colonization 15 percent—that is, in non-settler colonies, and its historical determinants. They find with crops and germs associated with bad that the share of the European population institutions. The effect remains high and in colonial times has a large and significant significant when controlling for the quality impact on income per capita today, even of institutions, while it weakens when con- when eliminating Neo-European countries trolling for measures of education.

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Table 6 Europeans and Development (Dependent variable: log per capita income, 2005; estimator: OLS)

Sample with Control for Control Share of less than 30% years of Control for for genetic Main regressor: Europeans of Europeans agriculture state history distance (1) (2) (3) (4) (5)

Share of descendants of Europeans, 1.058 2.892 1.079 1.108 0.863 per Putterman and Weil (4.743)*** (3.506)*** (4.782)*** (5.519)*** (3.601)*** Ancestry-adjusted years of 0.105 agriculture, in thousands (2.696)*** Ancestry-adjusted state history 1.089 (3.108)***

Fst genetic distance to the –4.576 United States, weighted (2.341)** Constant 8.064 7.853 7.676 7.195 8.637 (24.338)*** (17.030)*** (21.984)*** (21.594)*** (20.941)*** Observations 150 92 147 134 149 R2 0.526 0.340 0.580 0.656 0.545

Notes: All regressions include controls for the following geographic variables: absolute latitude; percent land area in the tropics; landlocked dummy; island dummy. Robust t statistics in parentheses. *** Significant at the 1 percent level. ** Significant at the 5 percent level. * Significant at the 10 percent level.

Table 6 captures the essence of these effect on contemporary development over results. Still controlling for our four base- and beyond the effect of European ancestry. line geographic variables, we introduce the In other words, while the traits characterizing share of Europeans (computed from the European populations are correlated with Putterman and Weil ancestry matrix) in a development, the historical legacy of state regression explaining log per capita income centralization and early agricultural adoption in 2005. The effect is large and statistically matters independently. significant (column 1), and remains signifi- Easterly and Levine (2012) interpret these cant when confining attention to a sample findings as consistent with the human-cap- of countries with fewer than 30 percent of ital argument by Glaeser et al. (2004) that Europeans. Introducing the Putterman and Europeans brought their human capital, and Weil ancestry-adjusted historical variables the Galor and Weil (2000) and Galor, Moav, (columns 3 and 4), we find that years of agri- and Vollrath (2009) emphasis on the role culture and state history remain significant of human capital in long-run development. after controlling for the share of Europeans, However, Easterly and Levine (2012) also suggesting that historical factors have an write: “Of course, there are many other things

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that Europeans carried with them besides provide a message analogous to Putterman general education, scientific and techno- and Weil’s: earlier historical development logical knowledge, access to international matters, and the mechanism is not through markets, and human capital creating institu- locations, but through ancestors—that is, tions. They also brought ideologies, values, intergenerational transmission. social norms, and so on. It is difficult for us to The basic lesson from Putterman and evaluate which of these were crucial either Weil (2010), Easterly and Levine (2012), alone or in combination” (27). This exempli- and Comin, Easterly, and Gong (2010) is fies the difficult issue of disentangling, with that historical factors—experience with the imperfect data that must be used to study settled agriculture and with former political comparative development, the effects of dif- institutions, and past exposure to frontier ferent human characteristics. The bottom technologies—predict current income per line, however, is that human traits are impor- capita and income distribution within coun- tant to account for comparative development tries, and that these factors become more patterns, quite apart from the effects of geo- important when considering the history of graphic and institutional factors. populations rather than locations. These contributions point to a key role for persis- 3.3 The Persistence of Technological tent traits transmitted across generations Advantages within populations in explaining develop- The deep historical roots of development ment outcomes over the very long run. are at the center of Comin, Easterly, and 3.4 Genetic Distance and Development Gong (2010). They consider the adoption rates of various basic technologies in 1000 Genealogical links among populations BC, 1 AD, and 1500 AD in a cross-section over time and space are at the center of of countries defined by their current bound- Spolaore and Wacziarg (2009), where we aries. They find that technology adoption in emphasized intergenerationally transmitted 1500, but also as far back as 1000 BC, is a human traits as important determinants of significant predictor of income per capita development. The main goal of this paper and technology adoption today. The effects was to explore the pattern of diffusion of of past technology continue to hold when economic development since the onset of including continental dummies and other the Industrial Revolution in Northwestern geographic controls. At the level of technol- Europe in the late eighteenth century and ogies, then, when examining a worldwide early nineteenth century. The idea is to sample of countries (including European identify barriers to the adoption of these countries), there is no evidence of a rever- new modes of production, with a specific sal of fortune. focus on human barriers (while controlling Interestingly, Comin, Easterly, and Gong for geographic barriers). The bottom line (2010) also find that the effects of past tech- is, again, that human traits matter, but the nological adoption on current technologi- paper emphasizes barrier effects stemming cal sophistication are much stronger when from differences in characteristics, rather considering the past history of technology than the direct effect of human character- adoption of the ancestors of current popu- istics on economic performance. lations, rather than technology adoption in We compiled a data set, based on work current locations, using the migration matrix by Cavalli-Sforza, Menozzi, and Piazza provided in Putterman and Weil (2010). (1994), providing measures of genetic dis- Hence, Comin, Easterly, and Gong’s results tance between pairs of countries, using

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information about each population’s ances- and the smallest is between the Danish and tral composition.17 Genetic distance is a the English, where the genetic distance is summary measure of differences in allele 0.0021.18 frequencies between populations across a To properly interpret the effect of genetic range of neutral genes (chromosomal loci). distance on differences in economic out- The measure we used, FST genetic distance, comes, two important clarifications are in captures the length of time since two popu- order. First, since genetic distance is based lations became separated from each other. on neutral change, it is not meant to cap- When two populations split apart, random ture differences in specific genetic traits genetic mutations result in genetic differen- that can directly matter for survival and fit- tiation over time. The longer the separation ness. Hence, we emphasize that empiri- time, the greater the genetic distance com- cal work using genetic distance provides puted from a set of neutral genes. Therefore, no evidence for an effect of specific genes genetic distance captures the time since two on income or productivity. Evidence of an populations have shared common ancestors “effect of genetic distance” is not evidence (the time since they were parts of the same of a “genetic effect.” Rather, it can serve as population), and can be viewed as a sum- evidence for the importance of intergenera- mary measure of relatedness between popu- tionally transmitted traits, including traits lations. An intuitive analogue is the concept that are transmitted culturally from one gen- of relatedness between individuals: two sib- eration to the next. lings are more closely related than two cous- Second, the mechanism need not be a ins because they share more recent common direct effect of those traits (whether cultur- ancestors—their parents rather than their ally or genetically transmitted) on income grandparents. and productivity. Rather, divergences in Figure 1 (from Cavalli-Sforza, Menozzi, human traits, habits, norms, etc. have cre- and Piazza 1994, page 78) is a phylogenetic ated barriers to communication and imita- tree illustrating how different human popu- tion across societies. While it is possible that lations have split apart over time. Such phy- intergenerationally transmitted traits have logenetic trees, constructed from genetic direct effects on productivity and economic distance data, are the population analogs performance (for example, if some parents of family trees for individuals. In this tree, transmit a stronger work ethic to their chil- the greatest genetic distance observed is dren), another possibility is that human traits between Mbuti Pygmies and Papua New also act to hinder development through a Guineans, where the FST distance is 0.4573, barrier effect: more closely related societies are more likely to learn from each other and 17 To accommodate the fact that some countries are adopt each other’s innovations. It is easier for composed of different genetic groups (e.g., the United someone to learn from a sibling than from States), we computed a measure of “weighted genetic a cousin, and easier to learn from a cousin distance,” representing the expected genetic distance between two randomly chosen individuals, one from each country, using the genetic distances associated with their respective ancestor populations. That is, we do not con- 18 Among the more disaggregated data for Europe, also sider the inhabitants of countries composed of different used in Spolaore and Wacziarg (2009), the smallest genetic genetic groups as a new homogeneous “population” in distance (equal to 0.0009) is between the Dutch and the the biological sense, but treat each of those countries as Danish, and the largest (equal to 0.0667) is between the formed by distinct populations, to accurately capture the Lapps and the Sardinians. The mean genetic distance differences in ancestor-transmitted traits within and across across European populations is 0.013. Genetic distances countries. This is the measure used in the empirical work are roughly ten times smaller on average across popula- discussed below. tions of Europe than in the world data set.

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San (Bushmen) Mbuti Pygmy Bantu Nilotic W. African Ethiopian S.E. Indian Lapp Berber, N. African Sardinian Indian S.W. Asian Iranian Greek Basque Italian Danish English Samoyed Mongol Tibetan Korean Japanese Ainu N. Turkic Eskimo Chukchi S. Amerind C. Amerind N. Amerind N.W. American S. Chinese Mon Khmer Thai Indonesian Philippine Malaysian Polynesian Micronesian Melanesian New Guinean Australian

FST Genetic Distance 0.2 0.15 0.1 0.05 0

Figure 1. Genetic Distance among Forty-two Populations

Source: Cavalli-Sforza, Menozzi, and Piazza (1994).

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than from a stranger. Populations that share distance as of 1500, reflecting the distance more recent common ancestors have had between indigenous populations, is nega- less time to diverge in a wide range of traits tively and significantly related to log income and characteristics—many of them cultural per capita in 2005. The effect rises in mag- rather than biological—that are transmitted nitude when considering genetic distance to from a generation to the next with variation. the United States using the current genetic Similarity in such traits facilitates communi- composition of countries. In other words, cation and learning, and hence the diffusion ancestry-adjusted genetic distance once and adaptation of complex technological and more is a better predictor of current income institutional innovations. than a variable based on indigenous charac- Under this barriers interpretation, dif- teristics, consistent with the results in table ferences in traits across populations hinder 5. Column 3 of table 7 introduces genetic the flow of technologies, goods and people, distance alongside the share of Europeans, and in turn these barriers hurt development. showing that genetic distance to the United For instance, historically rooted differences States bears a significant partial correla- may generate mistrust, miscommunication with current income that is not entirely tion, and even racial or ethnic bias and dis- attributable to the presence of Europeans. crimination, hindering interactions between While these simple regressions are infor- populations that could result in a quicker mative, a better test of the hypothesis that diffusion of productivity-enhancing innova- genetic distance captures human barriers tions from the technological frontier to the to the diffusion of development relies on a rest of the world. The barriers framework in bilateral approach, whereby absolute log Spolaore and Wacziarg (2009) predicts that, income differences are regressed on bilat- ultimately, genetic distance should have no eral genetic distance, analogous to a gravity residual effect on income differences (unless approach in international trade. This was the another major innovation occurs), as more main approach in Spolaore and Wacziarg and more societies, farther from the frontier, (2009), and is reflected in tables 8 and 9. The come to imitate the frontier technology. This bilateral approach offers a test of the barriers is consistent with the diffusion of economic story: if genetic distance acts as a barrier, it development as emerging from the forma- should not be the simple distance between tion of a human web, gradually joined by dif- countries that matters, but their genetic ferent cultures and societies in function of distance relative to the world technological their relative distance from the technological frontier. In other words if genetic distance frontier (McNeill and McNeill 2003). acts as a barrier, it should not be the genetic We test the idea that genealogical relat- distance between, say, Ecuador and Brazil edness facilitates the diffusion of develop- that should better explain their income dif- ment in our unified empirical framework. ference, but their relative genetic distance Table 7, columns 1 and 2 introduce genetic to the United States, defined as theabsolute distance to the United States in our basic income level regression, controlling for the 19 distance between two individuals, randomly selected from baseline geographic variables. Genetic each of the two countries in a pair. Formally, the weighted FST genetic distance between countries 1 and 2 is defined as: I J 19 W Since several countries in our sample, especially the FST 12 s1i s2 j dij = ∑i 1 ∑j 1 ( × × ) technological frontier (the United States) are composed of = = several distinct genetic groups, we used a weighted mea- where ski is the share of group i in country k, dij is the FST sure of genetic distance, capturing the expected genetic genetic distance between groups i and j.

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Table 7 Genetic Distance and Economic Development, Cross-Sectional Regressions (Dependent variable: log per capita income, 2005) Indigenous Ancestry-adjusted Control for the Main regressor: genetic distance genetic distance share of Europeans

(1) (2) (3)

Fst genetic distance to the United States, –4.038 1500 match (3.846)***

Fst genetic distance to the United States, –6.440 –4.576 weighted, current match (3.392)*** (2.341)** Absolute latitude 0.034 0.030 0.015 (5.068)*** (4.216)*** (1.838)* Percent land area in the tropics –0.182 –0.041 –0.384 (0.582) (0.135) (1.189) Landlocked dummy –0.637 –0.537 –0.521 (3.686)*** (2.971)*** (3.051)*** Island dummy 0.584 0.607 0.557 (2.389)** (2.392)** (2.262)** Share of descendants of Europeans, 0.863 per Putterman and Weil (3.601)*** Constant 8.451 8.618 8.637 (23.577)*** (21.563)*** (20.941)*** Beta coefficients on the bold variable –23.85% –27.11% –20.30% Observations 155 154 149 R2 0.499 0.496 0.545

Notes: Robust t statistics in parentheses. *** Significant at the 1 percent level. ** Significant at the 5 percent level. * Significant at the 10 percent level.

difference between the Ecuador–U.S. vector Xij of additional bilateral variables of genetic distance and the Brazil–U.S. genetic a geographic nature: distance. The specifications we use are as follows: (1) log Y log Y FST W | i − j | = β0 + β1 ij First, we estimate the effect of simple weighted genetic distance, denoted FST W , X . ij + β′2 ij + ε ij between country i and country j, on the absolute difference in log per capita income Second, we estimate the same specifica- between the two countries, controlling for a tion, but using as a regressor relative genetic

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Table 8 Income Difference Regressions with Genetic Distance (Dependent variable: absolute value of difference in log per capita income, 2005) Control for Specification includes: Simple GD Relative GD Horserace Europeans Relative GD 2SLS with Estimator: OLS OLS OLS OLS 1500 GD (1) (2) (3) (4) (5)

Fst genetic distance, weighted 2.735 0.607 (0.687)** (0.683)

Fst gen. dist. relative to the 5.971 5.465 5.104 9.406 United States, weighted (1.085)** (1.174)** (1.038)** (1.887)** Absolute difference in the 0.620 shares of people of (0.124)** European descent Absolute difference in latitudes 0.562 0.217 0.268 –0.369 0.112 (0.277)** (0.242) (0.250) (0.200)* (0.294) Absolute difference in longitudes –0.117 –0.016 0.024 –0.308 0.245 (0.230) (0.214) (0.205) (0.198) (0.240) Geodesic distance –0.017 –0.018 –0.025 0.025 –0.049 (0.030) (0.029) (0.028) (0.027) (0.031) 1 for contiguity –0.536 –0.475 –0.469 –0.351 –0.395 = (0.057)** (0.059)** (0.060)** (0.064)** (0.066)** 1 if either country is an island 0.123 0.143 0.147 0.181 0.180 = (0.097) (0.093) (0.094) (0.095)* (0.093)* 1 if either country is landlocked 0.047 0.040 0.034 0.076 0.011 = (0.089) (0.085) (0.087) (0.085) (0.085) Difference in percent land area 0.156 0.124 0.113 0.182 0.050 in KG tropical climates (0.095)* (0.096) (0.093) (0.092)** (0.100) 1 if pair shares at least –0.000 –0.027 –0.027 –0.008 –0.050 = one sea or ocean (0.076) (0.067) (0.068) (0.066) (0.079) Freight rate (surface transport) –0.506 –0.127 –0.162 –0.550 0.078 (0.748) (0.835) (0.835) (0.783) (0.674) Constant 1.211 1.083 1.078 0.984 0.941 (0.161)** (0.169)** (0.171)** (0.170)** (0.169)** Standardized Beta, absolute 19.47 4.32 GD (percent) Standardized Beta, relative 28.57 26.16 24.43 45.01 GD (percent) Standardized Beta, difference 24.95 in Europeans (percent) R2 0.08 0.11 0.11 0.16 0.10

Notes: All regressions are based on 10,878 observations from 148 countries. Two-way clustered standard errors in parentheses. ** Significant at the 5 percent level. * Significant at the 10 percent level.

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distance rather than simple genetic distance. error in contemporary genetic distance) by Genetic distance relative to the frontier (the using genetic distance in 1500 as an instru- United States) between countries i and j is ment for contemporary genetic distance. The R W W defined as: FST FST FST : magnitude of the beta coefficient increases ij = | i, US − j, US | to 45 percent. R (2) log Y log Y | FST Table 9 examines the relationship | i − j = γ 0 + γ 1 ij between genetic and economic distances X . through history, providing further evidence + γ′3 ij + ν ij for the barriers interpretation. Here, we Third, we conduct a horse race between consider the relative genetic distance to W R FST ij and FST ij : the English population in a sample going back to 1820, using Maddison’s data on per (3) log Y log Y FST R capita income. We continue to control for | i − j| = δ 0 + δ 1 ij a large number of measures of geographic FST W distance, climatic differences and transpor- + δ 2 ij tation costs. Since the availability of data + X ij . changes through time, we report both stan- δ′3 ij + ζ dardized betas for the full samples and for The prediction of the barrier model is the sample common to all dates. Focusing R that the effect of FST ij should be larger in on the latter for comparability across time, W magnitude than the effect of FST ij ( 1 1), we see that the magnitude of the effect R γ > β and that FST ij should “win out” in a horse of genetic distance is maximal in 1870, in race ( ). the wake of the Industrial Revolution. The δ 1 > δ 2 Consistent with this prediction, in table 8, effect then declines steadily from the peak columns 1 and 2 show that relative genetic of 16 percent in 1870 to 7.8 percent in 2005. distance enters with a larger magnitude This pattern provides a further suggestive than simple genetic distance, and column 3 test of the barriers model: in the wake of demonstrates that, when both measures a big innovation occurring in Northwestern are entered together, relative genetic dis- Europe, relative genetic distance to the tance trumps simple genetic distance. The frontier strongly predicts income differ- magnitude of the effect is substantial, with ences, but as more and more countries join a one standard deviation increase in genetic the ranks of industrialized countries, the distance increasing economic distance by effect declines. As already mentioned, this between 25 percent and 30 percent of a is consistent with a barrier model, which standard deviation in the absolute difference predicts that, ultimately, unless another in log per capita income, depending on the major innovation occurs, relative genetic specification. Column 4 shows once again distance should have no residual effect on that the effect of genetic distance is robust income differences, as more and more soci- to including the absolute difference in the eties, increasingly distant from the frontier share of Europeans. In other words, genetic society, imitate the frontier technology. distance accounts for comparative develop- Thus, these findings are consistent with our ment over and above the role played by the interpretation of genetic distance as captur- historical advantage of European popula- ing barriers to the long-term diffusion of tions. Finally, column 5 attempts to control development. for the possible endogeneity of post-1500 What traits are captured by genetic dis- migrations (as well as possible measurement tance? By its very definition, genetic distance

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Table 9 Historical Regressions (Dependent variable: Absolute difference in log per capita income, 1820 to 2005; estimator: OLS)

Income Income Income Income Income Income measured as of: 1820 1870 1913 1960 2005 (1) (2) (3) (4) (5)

Relative Fst genetic distance to the 0.793 1.885 1.918 4.197 4.842 English population, weighted (0.291)** (0.933)** (0.955)** (0.822)** (0.877)** Observations 990 1,431 1,596 4,005 10,878 Standardized Beta (percent) 14.31 23.06 20.93 31.56 28.50 Standardized Beta (percent), 10.98 16.37 15.53 9.00 7.77 common samplea R2 0.36 0.30 0.29 0.22 0.23

Notes: All regressions include an intercept term as well as the following geographic control variables: Absolute difference in latitudes, absolute difference in longitudes, geodesic distance (1000s of km), dummy for contiguity, dummy if either country is an island, difference in percent land area in KG tropical climates, dummy if either country is landlocked, dummy if pair shares at least one sea or ocean, freight rate. Two-way clustered standard errors in parentheses. aCommon sample of 780 observations based on 40 countries for which data is available across all periods. ** Significant at the 5 percent level. * Significant at the 10 percent level.

is a measure of genealogical relatedness 4. The Intergenerational Transmission between human populations. It is important of Development to stress again that while effects of genetic distance point to the importance of inter- 4.1 Mechanisms of Intergenerational generational links, they are not evidence of Transmission direct effects of specific genes or genetically transmitted traits on income or productiv- The empirical literature on geography and ity. Rather, genetic distance captures genea- the reversal of fortune and the more recent logical relations between populations, and contributions on the role of ancestor popula- hence differences in traits that are trans- tions suggest that, while there is significant mitted vertically from one generation to persistence in development, this persistence the next through a variety of mechanisms, is a characteristic of human populations and biologically but also culturally, as well as not of geographic locations. The work dis- through the interactions of the two inheri- cussed so far points to a key role for traits tance systems (gene-culture coevolution). transmitted from one generation to the next We detail these different mechanisms in the within populations over the long run. In next section. this section, we provide a general taxonomy

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of the different channels and mechanisms with identical genetic information can acquire through which these traits can be transmit- different phenotypes and transmit them to ted across generations and affect economic their daughter cells through the inheritance development. We then use this framework to of epigenetic markers (for example, methyla- discuss recent contributions to the econom- tion patterns). The epigenetic dimension is ics literature. vital for the biological development of indi- The starting point for our discussion is vidual organisms. In addition, some scholars a classification of different mechanisms of argue that it may play an important role in intergenerational transmission. The more evolution over time. An insightful and enter- recent literature on heredity and evolution taining discussion of this view is provided stresses that inheritance mechanisms are in Jablonka and Lamb (2005, chapter 4). As diverse and cannot be reduced to the old they explain, “A person’s liver cells, skin cells, nature versus nurture dichotomy. On the and kidney cells, look different, behave dif- contrary, people and societies inherit traits ferently, and function differently, yet they all from their ancestors through a complex contain the same genetic information. With interaction of biological and cultural mecha- very few exceptions, the differences between nisms, with an essential role played by envi- specialized cells are epigenetic, not genetic. ronmental factors. Following Jablonka and They are the consequences of events that Lamb (2005), we consider four inheritance occurred during the developmental history dimensions: genetic, epigenetic, behavioral, of each type of cell and determined which and symbolic. For convenience and to keep genes are turned on, and how their products the taxonomy relatively simple, we refer to act and interact (. . .). Although their DNA the first two dimensions (genetic and epi- sequences remain unchanged during devel- genetic) as “biological” and the remaining opment, cells nevertheless acquire informa- two dimensions (behavioral and symbolic) as tion that they can pass to their progeny. This “cultural.” information is transmitted through what are The genetic dimension has its molecular known as epigenetic inheritance systems” basis in DNA and its replication. Modern (113). Even though the extent and relevance genetics stresses that the genome is a com- of heritable epigenetic effects is debated in plex and dynamic system, and that genes the biological literature, there is increasing alone do not determine individual charac- evidence that changes in the epigenome can teristics. For example, Jablonka and Lamb be inherited across generations (“paramuta- (2005) write: “The stretch of DNA that is a tion”). Reviews of the evidence are provided, ‘gene’ has meaning only within the system as for instance, in Chandler and Alleman (2008) a whole. And because the effect of a gene and, for humans, in Morgan and Whitelaw depends on its context, very often a change (2008).20 This mechanism could provide an in a single gene does not have a consistent explanation for rapid changes in populations effect on the trait that it influences” (7). In that could not be brought about by genetic general, it is useful to view genetic transmis- selection. In general, it is conceptually sion as part of a broader system, interact- ing with other factors, including our second 20 Morgan and Whitelaw (2008) mention the well- dimension: epigenetics. known Dutch Famine Birth Cohort Study (Lumey 1992), The epigenetic dimension, even though which reported that children born during famine in World important in biology and medicine, is not as War II were smaller than average and that the effects could last two generations. However, they also point out that a well known among nonspecialists. Epigenetic subsequent report by Stein and Lumey (2000) failed to inheritance systems refer to the ways cells reproduce some of the findings.

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appropriate to consider both genetic and “evolution of cultural evolution,” Henrich epigenetic transmission, and their interac- and McElreath (2003) write: “While a vari- tions, when discussing biological inheritance ety of local genetic adaptations exist within systems.21 our species, it seems certain that the same Clearly, humans do not inherit traits only basic genetic endowment produces arctic biologically from their ancestors. Typically, foraging, tropical horticulture, and desert people acquire all sorts of traits through pastoralism [. . .]. The behavioral adapta- cultural transmission (for example their tions that explain the immense success of mother tongue and all kinds of views and our species are cultural in the sense that they beliefs about the world). We can distinguish are transmitted among individuals by social between behavioral transmission, which learning and have accumulated over gen- is also common among some animals (for erations. Understanding how and when such instance, monkeys), and symbolic transmis- culturally evolved adaptations arise requires sion, which some scholars view as uniquely understanding of both the evolution of the human—the philosopher Cassirer (1944) psychological mechanisms that underlie famously defined man as “the symbolic human social learning and the evolutionary animal.” Both mechanisms involve social (population) dynamics of cultural systems” learning. Behavioral transmission refers to (123).23 learning by direct observation and imita- While it is conceptually useful to dis- tion: I learned how to cook spaghetti by tinguish between biological and cultural watching my dad in the kitchen. In contrast, transmission, we must keep in mind that in symbolic transmission allows learning via reality those dimensions are interconnected systems of symbols: I learned how to cook in complex ways. An increasingly influential goulash from a cookbook. Human norms, literature within population genetics has habits, values, etc. tend to be passed across emphasized that human outcomes often generations both behaviorally (by example) stem from the interaction of biological and and symbolically (using language, art, writ- cultural factors. Both genes and culture are ing, and so on). In general, culture can be informational entities that are transmitted at defined as “information capable of affecting different rates across generations with varia- individuals’ behavior that they acquire from tions, and can be studied within a unified other members of their species through framework that focuses on the interaction teaching, imitation, and other forms of social between biological and cultural inheritance transmission” (Richerson and Boyd 2005, systems. This approach is known as dual 5).22 In their insightful discussion of the inheritance theory or gene–culture coevolution (Cavalli-Sforza and Feldman 1981; Boyd and Richerson 1985; Richerson and Boyd 21 In a different context, the relevance of epigenetics 2005). In such a framework, individual out- for the study of economic outcomes has been emphasized comes (phenotypes) are a mix of genetically in the microeconomic literature on human capital formation. For instance, Cunha and Heckman (2007) write: “the and culturally transmitted traits, affecting nature versus nurture distinction is obsolete. The modern the transmission rates of different genetic literature on epigenetic expression teaches us that the and cultural information. As Richerson and sharp distinction between acquired skills and ability fea- tured in the early human capital literature is not tenable” Boyd (2005) point out, genes and culture can (32). 22 Of course, this is one among many possible definitions of culture. It is well known that the word “culture” 23 An interesting example of analysis of cultural evolu- has multiple meanings. In a widely cited study, Kroeber tion with long-term implications for economic develop- and Kluckhohn (1952) provided 164 definitions of culture. ment is Shariff, Norenzayan, and Henrich (2010).

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be seen as “obligate mutualists, like two spe- It is now well understood that the adult cies that synergistically combine their spe- ability to digest milk evolved in response to cialized capacities to do things that neither a cultural innovation: dairying. The (domi- can do alone. [ . . . ] Genes, by themselves nant) gene controlling lactose absorption can’t readily adapt to rapidly changing envi- spread rapidly among populations that kept ronments. Cultural variants, by themselves, cows, sheep or goats, making those practices can’t do anything without brains and bodies. even more valuable from an evolutionary Genes and culture are tightly coupled but perspective. It also spread, but to a lesser subject to evolutionary forces that tug behav- extent, among Mediterranean people who ior in different directions” (194). consume milk in the form of cheese and Proponents of dual inheritance theory yogurt, from which the lactose has been believe that gene–culture evolution has removed, but it did not spread among popu- played an important role in the evolution lations without a dairying tradition. To pre- of human social psychology, including the dict whether a current population would evolution of social norms and institutions have a high or low tolerance for milk, one (e.g., Richerson and Boyd, chapter 6). This must look at the history of dairying among view informs a broad literature on the coevo- the population’s ancestors, no matter where lution of preferences, institutions and behav- they lived, rather than to the history of dairy- ior, such as the analyses of the evolution of ing in that population’s current territory. altruistic behavior by Boyd et al. (2003) and For instance, within the United States, it Gintis et al. (2003). General discussions of has been observed that the percentage of the emergence of prosperity-generating lactose intolerant adults is almost 100 per- behavior from an evolutionary perspective cent among Native Americans, 90 percent are provided by Seabright (2010) and Ridley among Asian Americans, 75 percent among (2010). African Americans, and only 12 percent A famous example of gene–culture coevo- among European Americans (Kretchmer lution is the evolution of adult tolerance for 1972; Enattah et al. 2002). This is consistent milk in some, but not all, human popula- with the intergenerational transmission of tions (Simoons 1969, 1970).24 Most people, the lactose absorption trait over an extended like most other mammals, can digest milk as historical span, through genetic and cultural infants but not as adults, because they lack interaction.25 the enzyme to digest lactose. However, there In general, the economic effects of human are several populations where most adults characteristics are likely to result from inter- can indeed digest milk. The largest concen- actions of biological and cultural factors, with tration of lactose absorbers can be found in the effects of genetic or epigenetic charac- Northwestern Europe, where less than 10–15 teristics on economic outcomes changing percent of the population is lactose intoler- over space and time depending on cultural ant. Low levels of lactose intolerance are characteristics, and vice versa. Consider, also found among Indians and some African for example, differences across individuals populations (Tutsi and Fulani). In contrast, within a given population (say, the United few Far Easterners, Bantu Africans, Pacific States) with respect to a clearly genetic fea- Islanders, and Native Americans can digest ture, such as having two X chromosomes, milk as adults. the purely genetic characteristic associated

24 See also Durham (1991, chapter 5) and Richerson 25 More examples of gene–culture interaction, and a and Boyd (2005, chapter 6). taxonomy, are provided by Durham (1991).

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with the female gender. This characteristic transmitted from parents to kids within is likely to have had very different effects populations, either behaviorally or through on a person’s income, life expectancy, and complex symbolic systems (e.g., by religious other outcomes in the year 1900 and in the teaching). For example, a direct effect stem- year 2000, because of changes in culturally ming from cultural transmission would be transmitted characteristics over the century. Weber’s (1905) argument that the Protestant This is a case where the impact of genes on ethic was a causal factor in industrializa- outcomes varies with a change in cultural tion (a recent critical reassessment of this characteristics.26 Conversely, we can think hypothesis has been provided by Becker and of the differential impact of a given cultural Woessmann 2009). characteristic—for example, the habit of As we discussed in the previous section, drinking alcohol—on individuals with differ- another possibility is that human traits act to ent genetic traits, such as variation in alcohol hinder development through a barrier effect. dehydrogenase, the alcohol-metabolizing In this case, it is not the trait itself that directly enzyme. affects economic performance. Rather, it In sum, we can aggregate inheritance is differences in inherited characteristics dimensions and their complex interactions in across populations that create barriers to the three broad sets: (a) biological transmission flow of technological and institutional inno- (genetic and epigenetic, and their interac- vations, ideas, etc., and, consequently, hurt tion), (b) cultural transmission (behavioral development. Historically rooted differences and symbolic, and their interaction), and (c) may generate barriers—e.g., via cultural, dual, capturing the interactions between bio- racial, and ethnic bias, discrimination, mis- logical and cultural transmission. trust, and miscommunication—hindering interactions between populations that could 4.2 Direct and Barrier Effects result in a quicker diffusion of productivity- When considering how traits transmit- enhancing innovations across populations, as ted along these different channels may have in Spolaore and Wacziarg (2009). A focus on affected development, we must introduce an barriers can explain why differences in inher- additional distinction, orthogonal to the cat- ited traits may matter, even though many egories discussed up to this point. No mat- new ideas and innovations are learned “hori- ter how traits are transmitted, their effects zontally” from individuals and populations on economic performance might operate that are not directly related, rather than “ver- either directly or as barriers to the diffusion tically” from one’s close relatives and ances- of development. tors. The fact is that, when barrier effects One possibility is that intergeneration- exist, vertically transmitted traits also affect ally transmitted traits have direct effects on horizontal learning and diffusion. People are productivity and economic performance. more likely to learn new ideas and adopt new A slow-changing cultural trait developed technologies from other people who, while in early history could be conducive directly not directly related to them, share more to high incomes in modern times if it is recent common ancestors and, consequently, on average, a larger set of inherited traits and 26 This is a variation on an example by Alison Gopnik characteristics. in her comment to debate between Steven Pinker and The microeconomic literature on the dif- Elizabeth Spelke at http://www.edge.org/discourse/ fusion of innovations (Rogers 2003) is consis- science-gender.html#ag. Steven Pinker’s response is also available at http://www.edge.org/discourse/sciencegender. tent with a major role for subjective barriers html. between groups and populations. As Rogers

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points out, summarizing the lessons from In light of the advances in the scientific decades of research, most people depend literature that we have mentioned above, upon a subjective evaluation of an innovation which have emphasized the interconnection that is conveyed to them from other indi- and coevolution of biological and cultural viduals like themselves, who have previously traits, it may be very hard, or even mean- adopted the innovation. This dependence on ingless, to separate biological and cultural the experience of near peers suggests that, effects in the long run. Therefore, while the at the heart of the diffusion process, we can rows in our taxonomy matrix provide useful often find potential adopters’ imitation of ideal benchmarks from a theoretical perspec- their network partners. tive, a more productive empirical approach might be to focus on whether such intergen- 4.3 A General Taxonomy erational mechanisms—whether biological The distinction between barrier effects or cultural (or dual)—operate directly or as and direct effects on the one hand, and the barriers to the diffusion of technological and different forms of intergenerational trans- institutional innovations—i.e., to identify mission on the other hand, can be conve- the respective roles of each column rather niently captured in the following matrix: than each row in the matrix that summarizes our proposed taxonomy. We return to these Direct Barrier points below, as we discuss specific contribu- Effect Effect tions to the economic literature. Biological Transmission (genetic and/or Quadrant I Quadrant IV 4.3.1 Quadrants I, II, and III epigenetic) A theory of development centered on a Cultural Transmission direct effect of biologically transmitted char- (behavioral and/or Quadrant II Quadrant V acteristics (Quadrant I) is provided in Galor symbolic) and Moav (2002). These authors suggest that Dual Transmission there may exist an intergenerationally trans- (biological-cultural Quadrant III Quadrant VI interaction) mitted trait affecting humans’ fertility strategies, with some individuals inheriting traits that induce them to follow a quantity-biased In what follows, we provide examples of strategy (having a high number of children), each of these quadrants from contributions while others would lean toward quality- to the social sciences, with a particular focus biased strategies (high parental investment on research that stresses the role of intergen- in a smaller number of children).27 Galor and erationally transmitted traits on economic Moav (2002) then argue that the evolution- development. As we will see, mechanisms ary dynamics of these traits had important from all six of the quadrants in the figure implications for the onset of the Industrial above have been studied in the economic Revolution and the following demographic literature. However, so far there have been transition. Their starting point is the pre- no systematic attempt to quantify the respec- industrial world, where everybody was tive power of each of the major explanations, nor has there been enough work on the pre- cise traits that can account for either direct 27 The authors are careful to notice that such differ- or barrier effects on development. These ences do not imply that one strategy is “better” than the other, in the same way as we cannot say that giant sequoias are the major avenues for promising future (which follow an extreme quality-biased strategy) are “bet- research in this emerging field. ter” than humans.

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caught in a Malthusian trap: technological of selection, traits that would “ensure later improvements just led to larger populations economic dynamism,” such as patience, but not an increase in income per capita hard work, and innovativeness, spread “bio- and standards of living.28 In such a world, logically throughout the population” (Clark a positive shock to productivity is associ- 2007, 8). In Clark’s view, this long-term pro- ated with an expansion of the population, cess worked through all preindustrial agrar- and hence selective pressure in favor of ian societies caught in a Malthusian trap, but productivity-enhancing traits, such as a focus was especially powerful in England because on parental investment. As the genetic pre- of “accidents of institutional stability and dilection to having fewer children spread as demography: in particular the extraordinary a result of these selective pressures, a tran- stability of England back to at least 1200, the sition out of the Malthusian regime endog- low growth of English population between enously occurred. In sum, Galor and Moav 1300 and 1760, and the extraordinary fecun- (2002) provide a theoretical argument for dity of the rich and economically successful” a direct effect of intergenerationally trans- (Clark 2007, 11). According to Clark, this mitted traits on the onset of the Industrial process played an essential role in allowing Revolution. While the focus of their paper England to break out of the Malthusian trap is on genetic transmission, Galor (2005) also after 1800. Clark’s argument, which is based points out that “the theory is applicable for on a detailed analysis of the historical record, either social or genetic intergenerational is related to Galor and Moav’s theoretical transmission of traits. A cultural transmission contribution, insofar as selection of traits in is likely to be more rapid and may govern the Malthusian era sets the stage for future some of the observed differences in fertility intensive economic growth. However, the rates across regions” (250). With this broader specific inherited traits stressed by Clark are interpretation, the theory in Galor and Moav different from those at the center of Galor (2002) spans Quadrants I, II, and III. and Moav’s story—Clark’s focus is mainly Another contribution that allows for a on attitudes towards work.29 Clark tends to direct effect of inherited characteristics emphasize biological mechanisms, but he on development is Clark’s (2007) book on does not take a definitive stance as to whether the advent of the Industrial Revolution in the human traits that caused the English to England. As in Galor and Moav (2002), experience the Industrial Revolution were Clark’s starting point is the preindustrial primarily biological or cultural. Hence, in a world caught in a Malthusian trap. In such a world, unlike in modern industrialized societies, economic success translated into 29 It is also worth noting that Clark, like Galor and Moav, is not making any claim that inherited traits made reproductive success: the richer individu- some populations generally “superior” to others: “This als had more surviving children, while the is not in any sense to say that people in settled agrarian poorer individuals had so few surviving chil- economies on the eve of the Industrial Revolution had become ‘smarter’ than their counterparts in hunter– dren that their families were often dying gatherer societies. . . . For the average person the division out. Therefore, over time the children of of labor . . . made work simpler and more repetitive. The the richest individuals tended to replace the argument is instead that it rewarded with economic and hence reproductive success a certain repertoire of skills children of the poorest. Through this form and dispositions that were very different from those of the pre-agrarian world, such as the ability to perform simple repetitive tasks hour after hour, day after day. There is 28 Empirical evidence on these effects is provided by nothing natural or harmonic, for example, in having a dis- Ashraf and Galor (2011a)—see our discussion in section position to work even when all basic needs of survival have 2 above. been achieved” (Clark 2007, 187–88).

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more general sense, Clark’s suggested mech- to specialization in task-oriented activities, anisms also belong to Quadrants I, II, and higher diversity will increase productivity III. for society as a whole, given complementari- A different set of channels through which ties across different tasks” (Ashraf and Galor genetic forces may affect economic devel- 2013, 2, footnote 1). Given such conflicting opment is explored by Ashraf and Galor effects of heterogeneity, Ashraf and Galor (2013). In that study, the authors focus on argue that intermediate levels of genetic genetic diversity within populations. Genetic diversity are most conducive to the accumu- diversity is a different concept from genetic lation of wealth. These can be interpreted distance, as it was used in Spolaore and as direct effects of inherited traits working Wacziarg (2009). Genetic distance refers to through the biological channel (Quadrant I), genetic differences between populations, and possibly its interaction with the cultural while genetic diversity is defined in terms of channel (Quadrant III). While the focus of heterogeneity within populations. Because Ashraf and Galor (2013) is on genetic diver- of the serial-founder effect, genetic diversity and biological mechanisms, a similar sity tended to decline as human populations trade-off between costs and benefits could moved from the ancestral lands where Homo emerge with respect to diversity in culturally sapiens originally emerged (East Africa) to transmitted traits. Ashraf and Galor (2011b) the rest of the World (Eurasia, Oceania and explicitly focus on the costs and benefits of the Americas).30 Hence, genetic diversity is cultural diversity (Quadrant II) when provid- highest among African populations and low- ing a framework to understand the effects of est among Amerindian populations. Ashraf prehistoric measures of geographic isolation and Galor (2013) show that genetic diver- on economic development.31 sity bears a nonmonotonic relationship with While there are relatively few contribu- development outcomes between years 1 and tions in the social sciences that focus on bio- 1500 AD, and that this effect extends to 2000 logical transmission, there is a much larger AD. They argue that this relation is causal, literature on culturally transmitted traits because of a trade-off between the benefi- and development (Quadrant II). Among cial and the detrimental effects of diversity recent contributions, Tabellini (2008, 2010) of traits on productivity. In their view, a high argues that specific cultural traits, such as level of genetic heterogeneity within populations comes with both costs and benefits for 31 Regarding the mechanisms in Quadrant I, there is economic development. Heterogeneity can also a literature in political science, discussed by Fowler be costly because it may reduce trust and and Schreiber (2008), arguing that direct biological effects coordination among individuals that are less are relevant in the study of political attitudes and behavior. Fowler and Schreiber (2008) write “The new science of similar and less closely related. However, human nature demands that we recognize that genes are diversity also comes with advantages: “in an the institutions of the human body. [. . .] we cannot fully economy where the labor force is character- appreciate their function in humans without understanding their role in the very complex political and social inter- ized by heterogeneity in a wide array of traits, actions that characterize our species” (914). Among the to the extent that some of these traits lead biological evidence cited in their survey is the involvement of neuroreceptors in specific political behavior, such as the link between the DRD2 gene, which codes for a dopamine 30 As explained in Ashraf and Galor (2013), subsets of receptor, and voter turnout (Dawes and Fowler 2009). populations left to establish new settlements, they carried These claims are controversial among political scientists, with them only part of the overall genetic diversity of their and have been criticized, for example, by Charney and parental populations, therefore reducing the heterogeneity English (2012). For a recent contribution on the molec- of populations that settled farther from the original cradle ular-genetic-based heritability of economic and political of humankind. preferences, see Benjamin et al. (2012).

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generalized trust and individualism, can organization is the city. Here cooperation account causally for variation in institutional is across kinship lines and external enforce- development across regions of Europe, and ment plays a bigger role. But morality and hence indirectly for variation in the level of reputation, although weaker, also matter and economic development there. An extensive extend beyond one’s kin.” This analysis sheds comparative and historical analysis of the light on why China and other advanced soci- role of culture, institutions, and development eties in East Asia have taken so long to catch is provided in Greif (1994, 2006), who offers up with the Industrial Revolution, in spite of a unified conceptual framework for analyz- positive historical preconditions and a sig- ing the persistence of institutions, their nificant technological lead in early periods, endogenous change, and the impact of past as documented in the aforementioned stud- institutions on subsequent development. As ies by Comin, Easterly, and Gong (2010) and Greif (2006, chapter 1) points out, culturally Putterman and Weil (2010).33 transmitted traits, such as beliefs and norms, Direct cultural mechanisms are also at the play a key role in determining which formal heart of the already cited study by Ashraf rules are followed and what is the actual and Galor (2011b), who argue that the inter- economic impact of an institutional organi- play between the forces of cultural assimi- zation. Guiso, Sapienza, and Zingales (2008) lation and cultural diffusion contributed to explain the persistence of differences in the long-term patterns of relative develop- culturally transmitted beliefs regarding col- ment in Europe and Asia. According to these lective action and cooperation across Italian authors, cultural rigidity was an advantage cities by successfully testing Putnam’s (1993) in earlier phases of development but a hin- hypothesis that those differences reflect the drance at later stages.34 Along similar lines, impact of historical variables on local civic Gorodnichenko and Roland (2010) study values.32 the interplay between culture, institutions, Cultural transmission plays a key role in and economic development. In their analy- the analysis of divergent paths by China and sis, individualism leads to more innovation Europe in Greif and Tabellini (2010), who while collectivism is associated with static argue that China’s and Europe’s distinct cul- efficiency gains. Consistent with the view tural and institutional trajectories during the that cultural traits are intergenerationally last millennium reflect the impact of differ- transmitted, Gorodnichenko and Roland use ent initial moral systems and kinship orga- genetic variables as instruments to study the nizations. According to Greif and Tabellini effects of culture on productivity. An issue (2010): “The Chinese clan is a kinship-based for this empirical strategy is whether one can hierarchical organization in which strong exclude additional channels (other intergen- moral ties and reputation among clan’s erationally transmitted traits, in addition to members are particularly important in sus- taining cooperation. In Medieval Europe, by contrast, the main example of a cooperative 33 This is an issue that Diamond also had to face in his book (1997, chapter 16). Classic references on this topic are Rosenberg and Birdzell (1987) and Mokyr (1990). 32 Evidence on the long-term persistence of pernicious 34 While Ashraf and Galor’s (2011b) model is speci- cultural traits is provided by Voigtländer and Voth (2012), fied in terms of direct effects of inherited cultural traits who use data on anti-Semitism in Germany and find con- on development (Quadrant II), some of their mechanisms tinuity at the local level over six centuries: anti-Semitic could be interpreted in terms of barrier effects (Quadrant pogroms during the Black Death in 1348–50 are a strong VI)—e.g., the gains from what they call “cultural diffusion” and robust predictor of violence against Jews in the 1920s could include the benefits from openness to innovations and of the vote share of the Nazi Party. from other cultures. We discuss barrier effects below.

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individualism versus collectivism), which may of origin of second-generation immigrants. also affect productivity and development. Reverse causality is not an issue in this con- Cultural transmission is also at the center text because the socioeconomic behavior of of the contribution by Doepke and Zilibotti second-generation immigrants cannot affect (2008), who provide a theory of preference the extent of family ties in their country of formation to explain the emergence of indus- origin. They find that the strength of fam- trial capitalists as the economically domi- ily ties significantly increases home produc- nant group following the British Industrial tion, reduces female and youth labor force Revolution. In this paper, altruistic parents participation and reduces geographic mobil- shape their children’s preferences in response ity. These results are consistent with a direct to economic incentives, resulting in the trans- effect on economic outcomes of traits transmission of values across generations. In their mitted across generations. Alesina, Giuliano, framework, middle-class families worked in and Nunn (2013) study the evolution and occupations that required effort, skill, and persistence of cultural norms about gender experience, and developed patience and roles and division of labor. They find that the work ethic, whereas landowning aristocratic contemporary rates of female participation in families relied on rents, and cultivated a taste labor, entrepreneurial, and political activities for leisure. Those class-specific attitudes, are significantly lower for the descendants of rooted in preindustrial professions, became societies that traditionally practiced plough determinants of economic success after the agriculture. Traditional plough agriculture is British Industrial Revolution transformed also associated with cultural attitudes disfa- the economic environment. voring gender equality. A key role of cultural The long-term effects of culturally trans- transmission as the relevant mechanism is mitted traits and attitudes have been studied confirmed by their analysis of female labor in several important studies at a more micro- force participation of second-generation economic level. For instance, Fernandez immigrants living in the United States. and Fogli (2009) study the economic impact These contributions are part of a growing of culture by examining the work and fertil- economic literature that studies the deter- ity behavior of second-generation American mination and dynamics of intergeneration- women (women born and raised in the ally transmitted preferences, beliefs, habits, United States from immigrant families), and norms, and attitudes. In pioneering work, find a significant effect of intergenerationally Bisin and Verdier (2000, 2001) provide an transmitted traits, proxied by outcomes in economic framework for the study of the a woman’s country of ancestry. Alesina and intergenerational transmission of cultural Giuliano (2010) study the relation between traits. Building on the population genetics family ties and a series of economic out- approach of Cavalli-Sforza and Feldman comes in production and labor markets. They (1981), Bisin and Verdier go beyond mechan- define a measure of family ties using individ- ical models of transmission. They explicitly ual responses from the World Value Survey introduce parents’ decisions regarding their regarding family role and children’s love children’s cultural socialization, assuming and respect for their parents, looking at the that parents are altruistic toward their chil- behavior of second-generation immigrants to dren, but can evaluate the effects of differ- assess causality and isolate the effect of cul- ent cultural norms only through the filter of ture. Identification is obtained by regressing their own culturally determined evaluation individual-level economic outcomes on the of their children’s utility. In these economic average extent of family ties in the country models, cultural transmission is the outcome

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of purposeful socialization decisions inside in the United States. They find that observed the family (vertical socialization) as well as intermarriage and socialization rates are con- of indirect socialization processes, such as sistent with Protestants, Catholics, and Jews social imitation and learning (horizontal and having a strong preference for children who oblique socialization). The persistence of identify with their own religious beliefs, and cultural traits of minorities or cultural assim- taking costly decisions to influence their chil- ilation are the outcomes of different costs dren’s beliefs. The framework can therefore and benefits associated with the socialization explain long-term persistence of traits and of children in various environments, which lack of cultural assimilation. affect the children’s opportunities for social The Bisin–Verdier approach has been imitation (what we call “behavioral trans- used by François (2002) and François and mission” in our taxonomy) and learning. An Zabojnik (2005) to study social capital important assumption in Bisin and Verdier’s and comparative economic development. approach is “imperfect empathy” by parents François and Zabojnik (2005) use the frame- towards their children. In Bisin and Verdier’s work to study the cultural transmission of framework, parents know the different traits social capital, defined in terms of “trustwor- that children can adopt, and anticipate the thiness.” Their results point to long-term choices that a child with a given trait will persistence, and “provide an explanation for make, but, as already mentioned, they evalu- why late developing countries may not eas- ate those choices only through their own sub- ily be able to transplant the modes of pro- jective evaluations, not their children’s own duction that have proved useful in the West” evaluations. Hence, parents, while altruistic, (François and Zabojnik 2005, 51). Such con- cannot “perfectly empathize” with their chil- tributions are part of a much larger literature dren, and tend to prefer children with their on the evolution of cooperation and trust, own cultural traits. As Bisin and Verdier which has a distinguished pedigree in eco- (2001) write, such “cultural transmission nomics. As Zak and Knack (2001, 295) point mechanisms have very different implications out, cross-country differences in trust were than evolutionary selection mechanisms observed by Smith (1766) and Mill (1848), with respect to the dynamics of the distri- who wrote “There are countries in Europe ... bution of the traits in the population” (298). where the most serious impediment to con- For instance, unlike more mechanical non- ducting business concerns on a large scale, is economic models of cultural transmission, the rarity of persons who are supposed fit to Bisin and Verdier’s approach does not pre- be trusted with the receipt and expenditure dict complete assimilation of minorities and of large sums of money” (Mill 1848, 132). A faster assimilation for smaller minorities. On recent example of the fast-expanding litera- the contrary, their model can shed light on ture on trust and development is the empiri- the persistence of “ethnic capital” in immi- cal contribution by Algan and Cahuc (2010), grants’ descendants, documented by Borjas who explicitly exploit transmission across (1992). The cultural transmission model of generations. Algan and Cahuc estimate the Bisin and Verdier has been applied to sev- effect of trust on economic growth by using eral cultural traits and norms (for a review of the inherited component of trust and its time this literature, see Bisin and Verdier 2010). variation. They show that inherited trust of For instance, Bisin, Topa, and Verdier (2004) descendants of immigrants in the United estimate the structural parameters of the States is influenced by the country of origin model of marriage and child socialization in and the timing of arrival of their ancestors, Bisin and Verdier (2000) for religious traits and use inherited trust of those descendants

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as a time-varying measure of inherited trust populations (Quadrant IV) is the argument in their country of origin. They find a sizable in Guiso, Sapienza, and Zingales (2009) that causal impact of inherited trust on world- somatic distance between European popula- wide growth during the twentieth century, tions is a negative correlate of bilateral trust, controlling for country fixed effects. and in turn of bilateral trade. Cultural barri- While most economic contributions on ers to trade exemplify the effects in Quadrant cooperation and trust tend to focus on V. For instance, Felbermayr and Toubal purely cultural transmission (Quadrant II), (2010) provide a creative empirical analysis an interdisciplinary literature on the evolu- of the relation between cultural proximity tion of altruistic behavior has also stressed and international trade, using bilateral score gene–culture interactions (Quadrant III), data from the Eurovision Song Contest, which includes Boyd et al. (2003), and Gintis a popular pan-European television show. et al. (2003). A recent book on this important Viewers in Cyprus award Greek singers 7.41 topic is Bowles and Gintis (2011). Building more points on average than the Greeks on extensive empirical research, Bowles and receive from viewers in other countries, Gintis calibrate models of the coevolution and Greek viewers award Cypriot singers an of genes and culture using genetic, archaeo- extra 6.26 points on average. The scores also logical, ethnographic, and experimental data. reveal a lack of affinity between some coun- According to these authors, cooperation with tries—for example, Cyprus and Turkey view- fellow group members has been essential to ers award each other below-average grades. human survival for thousands of generations, The relation need not be reciprocal. French and groups that created social institutions viewers grade British singers 0.86 points to protect the altruistic from exploitation below average, while British viewers are by the selfish have been able to flourish and neutral about French singers. Felbermayr prevail in conflicts with less cooperative and Toubal exploit the variation of these groups. In particular, this research suggests scores across time and within-pair to study that the emergence of social emotions, such the effects of cultural proximity on bilateral as shame and guilt, and the internalization trade, separating a preference channel from of social norms have been essential to the a trade-cost channel.35 They find that one- process of genetic and cultural coevolution third of the total effect of cultural proxim- (Quadrant III). ity on bilateral trade is due to the preference effect. 4.3.2 Quadrants IV, V, and VI A theoretical study of the interactions Other accounts of the development pro- between trade and long-term cultural and cess over the long run rely on barrier effects. institutional diversity across societies is pro- The basic hypothesis is that the intergenera- vided by Belloc and Bowles (2012). Their tional transmission of human traits—biologi- paper is motivated by the persistence of cally and/or culturally—generates long-term cultural and institutional differences in a persistence in income levels because, over time, genetic and cultural drift leads to greater distance between populations, and 35 Felbermayr and Toubal (2010) use two empirical strategies. The first strategy assumes that trade costs are thus higher barriers to the adoption of major not affected by swings in bilateral attitudes but depend on innovations when a given population is dis- the deep time-invariant components of cultural proximity, tant from the innovator population. while the preference channel depends on more short-lived fads. The second strategy assumes that trade costs depend One example of how genetically trans- only on the symmetric component of cultural proximity. mitted traits can create barriers between The two strategies provide similar results.

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globally integrated world economy. In their the diffusion of innovations. In other words, framework, the decentralized updating of while the rows in our taxonomy matrix may both preferences and contractual choices be useful to sketch ideal types of inheritance support durable cultural and institutional mechanisms, empirically it may be more differences, which provide a basis for special- fruitful to focus on the columns. Consistent ization, comparative advantage, and trade. In with this view, Spolaore and Wacziarg (2009) Belloc and Bowles (2012), international eco- use genetic distance relative to the tech- nomic integration, by making experimenta- nological frontier to provide evidence on tion more costly, paradoxically increases the barrier effects associated with long-term barriers to cultural–institutional transitions. historical relatedness between populations, As already described in section 3, in while remaining agnostic about whether the Spolaore and Wacziarg (2009) we empha- inheritance mechanisms behind those barri- size the types of long-run effects captured by ers are biological, cultural, or a combination Quadrants IV, V, and VI. In that paper, we of both. However, indirect evidence about place the genealogical history of populations the timing of the effects and the fact that they at the center of our analysis. The central operate even among populations that are hypothesis is that distance in human traits genetically very close (e.g., within Europe) (rather than distance in geographic space) suggest that a significant part of these barrier created barriers to the diffusion of fundamen- effects, while measured by genetic distance, tal innovations—most importantly, in recent are likely to have been transmitted culturally centuries, to the spread of the Industrial rather than biologically across generations. Revolution. We use relative genetic distance In Spolaore and Wacziarg (2012a), we from the frontier to capture those long-term pursue these ideas by studying the effects of barriers. As already discussed in the previ- human relatedness on the adoption of spe- ous section, genetic distance is a measure cific technologies across countries. To do so, of general genealogical relatedness, i.e., of we use the Comin, Easterly, and Gong (2010) similarity of slow-moving traits, genetic, epi- historical data set and the data set for post- genetic, and cultural. Hence, the “effects of 1800 technologies from Comin and Hobijn genetic distance” studied by Spolaore and (2009). We compare the empirical effects of Wacziarg (2009) are not synonymous with the simple genetic distance between popu- “effects of genetic transmission,” but capture lations to that of genetic distance relative to the effects of all kinds of intergenerationally the technological frontier, finding that the transmitted traits. In particular, the barrier latter trumps the former as a determinant of effects emphasized in that contribution can bilateral differences in technological adop- operate through any combination of inheri- tion rates. This empirical test is consistent tance mechanisms (Quadrants IV, V, and VI). with a barrier effect of long-term historical As discussed above, the most recent scien- distance, whereby societies that are more tific literature suggests that it may be concep- distant from the technological frontier tend tually very difficult, or even meaningless, to to face higher imitation costs—for example, separate biological and cultural mechanisms, because people may respond to differences given the coevolution of biological and cul- with distrust and unwillingness to interact tural traits. Consequently, a more productive and learn from each other. We find large approach, from an empirical perspective, and statistically significant effects of genetic is to focus on whether intergenerationally distance relative to the frontier on technol- transmitted traits—whether biological or ogy use differences. These large effects at cultural—operate directly or as barriers to the level of individual technologies can help

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explain current differences in total factor transmitted traits, if any, are responsible for productivity and income per capita across the original onset of such a major technologi- countries.36 cal and institutional change. This difficulty Desmet et al. (2011) document the close is due to at least two reasons. Firstly, phe- relationship between genetic distance and nomena such as the Industrial Revolution cultural differences. They show a strong are, almost by definition, unique and excep- and robust correlation between answers to tional, and therefore one cannot build a data the World Values Survey (WVS) and genetic set of different and independent Industrial distance, finding that European populations Revolutions to test alternative theories of that are genetically closer give more simi- onset. Secondly, such a complex phenome- lar answers to a set of 430 questions about non is likely to be the outcome of a vast set of norms, values, and cultural characteristics, forces and causes, including historical acci- included in the 2005 WVS sections on per- dents and contingencies. For example, it has ceptions of life, family, religion, and morals. been argued that the Industrial Revolution They also find that the correlation between may not have occurred where and when it genetic distance and cultural values remains did, were it not for a series of historical con- positive and significant after controlling for tingencies, such as the events leading to the linguistic and geographic distances. Their signing of the Magna Carta, the failure of empirical analysis supports Spolaore and the Spanish armies to subjugate Protestant Wacziarg’s (2009, 2012a) interpretation of societies, the Glorious Revolution, and, genetic distance, not as a purely genetic mea- at a deeper level, the emergence of a sure capturing exclusively biological effects transnational market for ideas during the and mechanisms, but as a broad genealogical Enlightenment. An extensive discussion of measure of historical links between popula- these important issues appears in Mokyr tions, capturing the intergenerational trans- (2005, 2010). As Mokyr (2005) points out: mission of traits along the three dimensions, “underneath its surface the European soil in including the cultural channel and the gene- 1500 already contained the seeds of future culture interaction channel (Quadrant IV, V, divergence in 1750. There was, however, VI). nothing inexorable about what happened A focus on barrier effects is especially after: the seeds need not have sprouted, they promising when the goal is to study the dif- could have been washed away by the flood of fusion of development and innovations from wars, or the young sprouts of future growth the technological frontier. In contrast, it is might have been pulled out by rapacious tax much harder to assess the effects of intergen- collectors or burned by intolerant religious erationally transmitted traits on the onset of authorities. There could have been a Great major technological changes. For instance, Convergence after 1800 instead of what while barrier effects can explain how the actually took place, in which Europe would Industrial Revolution spread across differ- have reverted back to the kind of economic ent societies over time and space, it is much performance prevalent in 1500. In the end, harder to identify which intergenerationally the economic history of technology—like all evolutionary sequences—contains a deep 36 While long-term historical barriers captured by and irreducible element of contingency. Not genetic distance tend to prevent productivity-enhancing all that was had to be” (1171). interactions, such as the spread of new technologies, they In general, a fuller understanding of may also reduce destructive interactions between populations, such as international conflict, as we show in Spolaore the process of economic development will and Wacziarg (2012b). emerge from the study of the interactions

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between persistent traits, transmitted from both persistence and reversal of fortune, one generation to the next over the long and sheds light on the spread of economic run, and contingent shocks and changes, development. The need to adjust for popu- whose effects across societies may partly lation ancestry is at the core of Putterman depend on persistent traits—for example, and Weil’s (2010) contribution, showing when the diffusion of brand-new technologi- that current economic development is cor- cal and institutional innovations in modern related with historical characteristics of a times depends on long-term genealogical population’s ancestors, including ancestors’ relatedness. years of experience with agriculture, going back, again, to the Neolithic transition. The overall message from Comin, Easterly, and 5. Conclusion Gong (2010), Putterman and Weil (2010), The recent literature on economic growth and several other contributions covered in and development has increasingly focused this article is that long-term historical factors on very long-run effects of geographic, his- predict current income per capita, and that torical, and cultural factors on productiv- these factors become much more important ity and income per capita. In this article when considering the history of populations we have reviewed this line of research, and rather than locations. presented empirical evidence documenting Spolaore and Wacziarg (2009, 2012a) take such effects. In conclusion, what have we this insight a step further, studying the dif- learned from this new literature? fusion of development and innovations with A first message from this research is that an explicit focus on measures of long-term technology and productivity tend to be genealogical relatedness between popula- highly persistent even at very long horizons. tions (genetic distance). The third message A major finding is the indirect and persistent from this literature, then, is that long-term effect of prehistorical biogeographic condi- genealogical links across populations play an tions. According to Olsson and Hibbs (2005), important role in explaining the transmission Neolithic advantages continue to have of technological and institutional knowledge effects on contemporary income per capita, and the diffusion of economic development. consistently with Diamond’s hypothesis. The Much research remains to be done on the effects of favorable Neolithic conditions on specific mechanisms at work, and the spe- productivity in more recent times is also doc- cific intergenerationally transmitted traits umented by Ashraf and Galor (2011a). Long- that hinder development either directly or by term persistence is at the heart of Comin, creating barriers. Conceptually, one can dis- Easterly, and Gong’s (2010) findings that tinguish among different transmission mech- countries using the most advanced technolo- anisms (biological and cultural). However, gies in the year 1000 B.C. tend to remain the current scientific advances have increas- users of the most advanced technologies in ingly blurred and made obsolete the old 1500 and today, particularly if we correct for distinction between nature and nurture, and their populations’ changing ancestry. emphasized the complex interactions among The importance of controlling for pop- different inheritance systems (genetic, epi- ulations’ ancestry highlights the second genetic, behavioral, and symbolic: Jablonka message from this literature: long-term per- and Lamb 2005) and the coevolution of genes sistence holds at the level of populations and culture (Richerson and Boyd 2005). In rather than locations. A focus on populations this article, we argue that, when studying rather than locations helps us understand the economic impact of intergenerational

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transmission, a more promising approach Firstly, long-term history, while very can proceed from the distinction between important, is not a deterministic straight- direct and barrier effects. The hypothesis jacket. Historical variables do not explain behind barriers effects of genealogical relat- all of the variation in income per capita. In edness is that populations which happen to Putterman and Weil (2010), the R2 on state be historically and culturally farther from history, agriculture adoption and the frac- the innovators tend to face higher costs to tion of European descent jointly does not imitate and adopt new technologies, because exceed 60 percent. In Comin, Easterly, and of differences in values and norms, mistrust, Gong (2010), the R2 in regressions of cur- miscommunication, discrimination, etc. Our rent income or technological sophistication findings (Spolaore and Wacziarg 2009, 2012a) on lagged technologies is never greater than on the effects of genetic distance relative to 40 percent, depending on the exact time the technological frontier are consistent with frame (see their table 8B). In Spolaore and an important role for barrier effects, but the Wacziarg (2009), a standard deviation change respective quantitative contribution of direct in genetic distance relative to the world tech- versus barrier effects remains a subject for nological frontier accounts for about 35 per- future research. cent of the variation in income differences. Taking the recent literature seriously That leaves a large fraction of variation to be implies acknowledging the limits faced by explained by other factors and forces, sug- policymakers in significantly altering the gesting that many societies can escape the wealth of nations when history casts a very straightjacket of history. Persistence does long shadow. A realistic understanding of the not mean perfect, deterministic persistence. role of historical factors is essential for pol- While there is significant persistence in the icy assessment. One could obtain mislead- use of advanced technologies over time and ing conclusions about the effects of specific space, there have also been significant shifts policies and institutions when not taking into in the technological frontier, with popula- account the role of long-term variables. For tions at the periphery becoming major inno- example, one may erroneously infer a major vators, and former frontier societies falling role for specific national institutions in Africa, behind. In a nutshell, while long-term his- even though, as shown by Michalopoulos tory matters, there is much scope for varia- and Papaioannou (2010), national institutions, exceptions and contingencies. tions have little effect when looking at the Secondly, such variations, exceptions and economic performance of homogeneous contingencies are unlikely to take place in a ethnic groups divided by national borders. purely random fashion, but are affected by In general, a richer understanding of the human actions. The intergenerational trans- mechanisms through which long-term vari- mission of traits and characteristics happens ables affect current outcomes will improve with variation, and the diffusion of knowledge our ability to assess the impact of current and takes place not only vertically (from one gen- future policies. eration to the next within populations) but If current development is a function of also horizontally (across populations). Major very long-term historical factors, are devel- changes can sometime take place relatively opment policies hopeless? Not necessarily. quickly, sidestepping historical constraints. The evidence is consistent with cautious Still, they are more likely to be successful and optimism about our ability to overcome long- persistent if rooted in a fuller understanding term constraints, for three major reasons: of long-term forces and traditions. To para- phrase the Churchill quote with which we

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opened this article, the further backward This is not inconsistent with the existence you look, the further forward you may be of historical and cultural barriers across able to produce positive change. Cultures populations, because such barriers oper- and societies are persistent but dynamic, and ate on average, and it is always possible for can change over time, as stressed in a famous some society to develop traits and charac- quote attributed to Senator Daniel Patrick teristics that make it closer to the innovator, Moynihan: “The central conservative truth is or to sidestep cultural and historical barriers that it is culture, not politics, that determines altogether through historical contingencies. the success of a society. The central liberal When Japan got the Industrial Revolution, it truth is that politics can change a culture and became a cultural beachhead. South Korea save it from itself.”37 followed, and then industrialization and Thirdly, a cautiously optimistic outlook can modernization spread across several societ- emerge if we interpret the effects of history ies in East Asia. North Korea, in contrast, and relatedness in terms of barriers to the is a sad example that very bad policies and diffusion of development and innovations. institutions can kill growth and development Barriers do matter and can explain long in a society irrespectively of any long-term delays in the diffusion of prosperity across historical and cultural variables. One can societies. Barriers can also be overcome and hope that North Koreans will be able to ben- have indeed been overcome historically. efit from their historical, cultural, and geo- In our work, the estimated effect of rela- graphic proximity to South Koreans when tive genetic distance on income differences those artificial constraints to development peaked in the second half of the nineteenth are finally removed. An example of how more century, and has been declining in the sec- recent institutional shocks may interact with ond half of the twentieth century. This sug- longer-term variables is provided by Bai and gests that the degree to which differences in Kung (2011), who use the ending of the sev- intergenerationally transmitted traits con- erance of ties between the Chinese mainland stitute barriers has changed in the era of and Taiwan as a natural experiment. They globalization, through greater exchanges of find that relative but not absolute genetic human capital, ideas, blueprints, and greater distance from Taiwan has increased the convergence of norms and values, facilitating income difference between pairs of Chinese the horizontal diffusion of technological and provinces. While one must be cautious about institutional innovations.38 the interpretation of this specific case study, The diffusion of modern development to these barrier effects are consistent with the East Asia, which started in Japan and spread mechanisms suggested in our own research to nearby societies, is an example of success- (Spolaore and Wacziarg 2009 and 2012a). In fully overcoming long-term barriers. Japan is general, these examples illustrate the com- geographically, historically, and genetically plex interplay between more recent political distant from the European innovators, but it and institutional shocks and long-term his- got the Industrial Revolution relatively early. torical forces. Another interesting example is the role of Hong Kong in China’s development, 37 This quote inspired a book by Harrison (2006). 38 Fruitful links may exist between this important area recently stressed by Romer (2009). Romer for future research and the growing literature on educa- argues that the fast rate of economic growth tion and human-capital externalities in neighborhoods and in China has a lot to do with the demonstra- cities (e.g., see Moretti 2004) and on the economics of social interactions (e.g., see Durlauf and Ioannides 2010; tion effect of Hong Kong—that is, Hong Ioannides 2012). Kong was a beachhead in China from which

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modernity was able to spread. Under this Robinson. 2005. “Institutions as a Fundamen- view, when Britain gave back Hong Kong to tal Cause of Long-Run Growth.” In Handbook of Economic Growth, Volume 1A, edited by Philippe China in 1997, it was not so much the reinte- Aghion and Steven N. Durlauf, 385–472. Amsterdam gration of Hong Kong into China but rather and Boston: Elsevier, North-Holland. the reintegration of China into Hong Kong. Acemoglu, Daron, Simon Johnson, and James A. Rob- inson. 2012. “The Colonial Origins of Comparative According to Romer, Southern Chinese cities Development: An Empirical Investigation: Reply.” or special economic zones developed largely American Economic Review 102 (6): 3077–3110. as the result of having generalized what had Albouy, David Y. 2012. “The Colonial Origins of Com- parative Development: An Empirical Investigation: worked in Hong Kong. This progressively Comment.” American Economic Review 102 (6): led to the spread of more free-market ori- 3059–76. ented rules, as Romer calls them, to the rest Alesina, Alberto, and Paola Giuliano. 2010. “The Power of the Family.” Journal of Economic Growth 15 (2): of China. Romer advocates generalizing this 93–125. example by ways of charter cities that could Alesina, Alberto, Paola Giuliano, and Nathan Nunn. act as beachheads in order to accelerate the 2013. “On the Origins of Gender Roles: Women and the Plough.” Quarterly Journal of Economics 128 (2): diffusion of development. While we do not 469–530. know whether this specific idea may actually Algan, Yann, and Pierre Cahuc. 2010. “Inherited Trust work in practice, we present it as an interest- and Growth.” American Economic Review 100 (5): 2060–92. ing example of the kind of policies reflect- Appleby, Joyce. 2010. The Relentless Revolution: A His- ing an understanding of long-term historical tory of Capitalism. New York and London: Norton. forces and barriers to the diffusion of devel- Ashraf, Quamrul, and Oded Galor. 2013. “The ‘Out-of- Africa’ Hypothesis, Human Genetic Diversity, and opment. In a way, this can be interpreted as Comparative Economic Development.” American an example of a more general approach to Economic Review 103 (1): 1–46. development policies: if you want to develop, Ashraf, Quamrul, and Oded Galor. 2011a. “Dynamics and Stagnation in the Malthusian Epoch.” American build on historical precedent but try to gen- Economic Review 101 (5): 2003–41. eralize exceptions to the persistence of eco- Ashraf, Quamrul, and Oded Galor. 2011b. “Cultural nomic fortunes. Diversity, Geographical Isolation, and the Origin of the Wealth of Nations.” National Bureau of Eco- In conclusion, there is still room for devel- nomic Research Working Paper 17640. opment policies to reduce barrier effects and Bai, Ying, and James Kai-sing Kung. 2011. “Genetic to accelerate the spread of ideas and inno- Distance and Income Difference: Evidence from Changes in China’s Cross-Strait Relations.” Econom- vations across populations, especially in the ics Letters 110 (3): 255–58. context of an increasingly globalized world Becker, Sascha O., and Ludger Woessmann. 2009. where barriers to the diffusion of develop- “Was Weber Wrong? A Human Capital Theory of Protestant Economic History.” Quarterly Journal of ment can be brought down more rapidly. Economics 124 (2): 531–96. The research surveyed in this article can Belloc, Marianna and Samuel Bowles. 2012. “Cultural– help us assess both the potential and limits Institutional Persistence under International Trade and Factor Mobility.” Santa Fe Institute and Sapi- of these policies. enza University of Rome, http://papers.ssrn.com/ sol3/papers.cfm?abstract_id=1368300. References Benjamin, Daniel J., et al. 2012. “The Genetic Archi- tecture of Economic and Political Preferences.” Pro- Acemoglu, Daron, Simon Johnson, and James A. Rob- ceedings of the National Academy of Sciences of the inson. 2001. “The Colonial Origins of Comparative United States of America 109 (21): 8026–31. Development: An Empirical Investigation.” Ameri- Bisin, Alberto, Giorgio Topa, and Thierry Verdier. can Economic Review 91 (5): 1369–1401. 2004. “Religious Intermarriage and Socialization in Acemoglu, Daron, Simon Johnson, and James A. Rob- the United States.” Journal of Political Economy 112 inson. 2002. “Reversal of Fortune: Geography and (3): 615–64. Institutions in the Making of the Modern World Bisin, Alberto, and Thierry Verdier. 2000. “‘Beyond the Income Distribution.” Quarterly Journal of Econom- Melting Pot’: Cultural Transmission, Marriage, and ics 117 (4): 1231–94. the Evolution of Ethnic and Religious Traits.” Quar- Acemoglu, Daron, Simon Johnson, and James A. terly Journal of Economics 115 (3): 955–88.

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