DP5630 The Diffusion of Development

Author(s): Enrico Spolaore , Romain Wacziarg

Publication Date: April 2006

Keyword(s): barriers , genetic distance , income differences

JEL(s): O11 , O57

Programme Areas: Institutions and Economic Performance

Link to this Page: www.cepr.org/pubs/dps/DP5630.asp

This paper studies the barriers to the diffusion of development across countries over the very long-run. We find that genetic distance, a measure associated with the amount of time elapsed since two populations' last common ancestors, bears a statistically and economically significant correlation with pairwise income differences, even when controlling for various measures of geographical isolation, and other cultural, climatic and historical difference measures. These results hold not only for contemporary income differences, but also for income differences measured since 1500 and for income differences within Europe. We uncover similar patterns of coefficients for the proximate determinants of income differences, particularly for differences in human capital and institutions. The paper discusses the economic mechanisms that are consistent with these facts. We present a framework in which differences in human characteristics transmitted across generations - including culturally transmitted characteristics - can affect income differences by creating barriers to the diffusion of innovations, even when they have no direct effect on productivity. The empirical evidence over time and space is consistent with this 'barriers' interpretation.