The deep roots of economic development


Jason Collins


July 29, 2013

I first flagged this article a year or so ago when it was released as a working paper, but the new Journal of Economic Literature paper How Deep Are the Roots of Economic Development (ungated pdf) by Enrico Spolaore and Romain Wacziarg has so much good material in it that it is worth a revisit.

I am going to cover the article over two posts. This first post covers the major theme of the first half of the paper - that it is populations, not institutions, that underlie persistent differences in economic development. In a second post, I comment on Spolaore and Wacziarg’s analysis of the genetic and cultural intergenerational transmission of development.

To start, I will let Spolaore and Wacziarg (or the authors they reference) do most of the talking. First, from Glaeser and colleagues (2004):

[Acemoglu, Johnson, and Robinson’s] results do not establish a role for institutions. Specifically, the Europeans who settled in the New World may have brought with them not so much their institutions, but themselves, that is, their human capital. This theoretical ambiguity is consistent with the empirical evidence as well.

On Michalopoulos and Papaioannou’s (2010) analysis of institutions in Africa:

Michalopoulos and Papaioannou (2010) find that national institutions have little effect when one looks at the economic performance of homogeneous ethnic groups divided by national borders. …

Overall, their findings suggest that long-term features of populations, rather than institutions in isolation, play a central role in explaining comparative economic success.

On Putterman and Weil (2010):

Putterman and Weil’s results strongly suggest that the ultimate drivers of development cannot be fully disembodied from characteristics of human populations. When migrating to the New World, populations brought with them traits that carried the seeds of their economic performance. This stands in contrast to views emphasizing the direct effects of geography or the direct effects of institutions, for both of these characteristics could, in principle, operate irrespective of the population to which they apply. A population’s long familiarity with certain types of institutions, human capital, norms of behavior or more broadly culture seems important to account for comparative development.

Finally, on Easterly and Levine (2012):

Easterly and Levine (2012) confirm and expand upon Putterman and Weil’s finding, showing that a large population of European ancestry confers a strong advantage in development, using new data on European settlement during colonization and its historical determinants. They find that the share of the European population in colonial times has a large and significant impact on income per capita today, even when eliminating Neo-European countries and restricting the sample to countries where the European share is less than 15 percent—that is, in non-settler colonies, with crops and germs associated with bad institutions.

This angle reflects Greg Clark’s analysis in A Farewell to Alms (largely contained in Chapter 8). Clark asks why economic growth took so long to emerge in England when the important institutional backbone for economic development was established well before 1800. Clark points to changes in the characteristics of the population.

These articles also reflect the question I tend to ask about institutional explanations of development. Why do good institutions exist in some places and not others? The above evidence suggests that institutions are largely endogenous to the population.

In my next post, I address the intergenerational transmission of traits. And I’ve added Spolaore and Wacziarg’s paper to my evolutionary biology and economics reading list.