Deep roots or current policies – what drives sustained prosperity differences across locations?
Mercedes Delgado, Christian Ketels, Michael Porter, Scott Stern18 September 2014
There is a consensus among economists that ‘deep roots’ – geography, natural endowments, and institutions – are important determinants of prosperity differences across countries. This column argues that deep roots matter, but they are neither the whole story nor an excuse for political inaction today. Current policies are important – especially the broad range of policies that shape the business environment and the sophistication of companies – and they are affected but not determined by the past.
What explains the dramatic differences in prosperity levels across locations? A large segment of the research-oriented literature points towards ‘deep roots’, i.e. legacy factors that have been set long ago (Spolaore and Wacziarg 2012). The debate rages on as to whether geographic location and natural endowments (e.g. McCord and Sachs 2013, Sachs et al. 2001) or institutional legacies – themselves influenced by geography and natural conditions (e.g. Acemoglu et al. 2001, Acemoglu and Robinson 2012) – are key.
How history can contribute to better economic education
Coen Teulings11 July 2014
The financial crisis and the Great Recession have led to calls for more economic history in economic education. This column argues for a much broader use of history in economics courses, as a device for teaching both the logic and the empirical relevance of economics. A proposed curriculum would include the rise of agriculture, urbanisation, war, the rule of law, and demography.
Historians tend to stress the particularities in history. Each event is unique, caused by a set of conditions that will never reproduce themselves again. In turn, each event causes new events, which therefore are equally unique and equally irreproducible. Hence, historians conduct painstaking research into the details of these conditions to understand the course of history.
There is now widespread agreement that ‘deep’ history matters for comparative development. Recent research has shown that ancestry – the transmission of genetic and cultural traits across generations – matters more than the history of geographic regions. This column argues that long-term divergences in inherited traits can create barriers to the diffusion of technology. The greater a population’s genetic distance to the population on the technological frontier, the lower its relative income will be. Development policies should aim at reducing barriers to exchange and communication.
This paper explores the consequences and origins of contemporary differences in well-being across ethnic groups within countries. The authors show that ethnic inequality is strongly inversely related to per capita income, and that differences in geographic endowments across ethnic homelands explain a sizable portion of contemporary ethnic inequality. This deeply rooted inequality in geographic attributes across ethnic regions is also negatively related to comparative development.
This paper studies empirically technology diffusion across countries and over time, finding significant evidence that technology diffuses slower to locations that are farther away from adoption leaders. The authors document the significant role that geography plays in determining technology diffusion across countries.
Three centuries of climatic variation and the world income distribution
John C Bluedorn, Akos Valentinyi, Michael Vlassopoulos15 December 2009
Hot countries tend to be poorer. This column uses the cross-century, cross-country variation in climatic temperatures to estimate the effects of historic temperature upon current incomes. The negative relationship between current temperature and income appears due to temperature variations in the 18th and 19th centuries. That suggests that the consequences of climate change may be felt for a very long time.
Policymakers around the world are being urged to address the effects of climate change. Formulating a unified policy on climate change is one of the central goals of the Copenhagen Summit on Climate Change now underway. A key input into that decision-making process is an accurate appraisal of the possible economic consequences of climate change.
African nations with ‘bad’ terrain suffered less from the slave trade. More than a century after the slave trade ended, the protective benefits of ruggedness still outweigh its contemporary economic disadvantages when it comes to GDP per capita.
Mountainous terrain is tough to farm, costly to traverse, and often inhospitable to live in; yet in Africa, countries with a rugged landscape tend to perform better than their flatter rivals. To explain this paradox, CEPR Research Fellow Diego Puga and his co-author Nathan Nunn reach back more than two centuries – to the slave trade.
Geographical characteristics affect economic outcomes directly – making life harder for landlocked countries, for example – and indirectly, by altering the path of history.