Title: The Diffusion of Development
Author: Enrico Spolaore and Romain Wacziarg
Scope: 4 stars
Readability: 2 stars
My personal rating: 4 stars
See more on my book rating system.

Topic of Book

The authors use statistical modeling to determine what factors encourage and discourage the diffusion of technology across cultures.
Note that the authors use “genetic distance” (i.e. how closely related two peoples are related genetically) as a proxy for “cultural distance” (i.e. how closely related two people’s cultures are) on the assumption that peoples with similar genes will tend to have similar cultures. The authors make no attempt to differentiate between genes and culture.

Key Take-aways

• Culture has a big effect on the speed of technological diffusion between countries.
• Technologies diffuse fastest between populations with similar cultures.
• Even when countries are geographically close to each other, cultural differences create a barrier to technological diffusion. Cultural differences within Europe had a particularly strong effect.
• This cultural barrier increased rapidly during the Industrial Revolution, but has slowly declined since. This is the reason why industrial technology was fast to diffuse within Northwestern Europe, but slow to diffuse to Southern Europe, Eastern Europe and the rest of the world.

Important Quotes from Book

We argue that barriers to the diffusion of development prevent poor countries from adopting economic practices, institutions and technologies that make countries rich. We argue that these barriers are not only geographic, but also human.

The main findings of this paper are fourfold. First, measures of genetic distance between populations bear a statistically and economically significant effect on differences in income per capita, even when controlling for various measures of geographical isolation, and other cultural, climatic and historical difference measures. Second, the effect of genetic distance holds not only for contemporary income differences, but also for income differences measured since 1500. While the effect is always large, positive, and significant, the magnitude of the effect has varied over time in an interesting way. The effect declined from 1500 to 1820, went up dramatically, peaked at the time of the Industrial Revolution, and steadily declined afterwards. Third, the effect of genetic distance on income differences is larger for countries that are geographically closer. Finally, the effect of genetic distance holds not only for contemporary and historical worldwide income differences, but also for income differences within Europe. The magnitude of the effect of genetic distance is larger within European countries than across countries from all continents.

The effect declined from 1500 to 1820, spiked up and peaked in 1870, and steadily declined again afterwards. This is consistent with the interpretation of genetic distance as related to barriers to the diffusion of innovations. The effect of barriers should peak when a major innovation is introduced and initially adopted only by the populations that are closest to the innovator (such as the industrial revolution in the 19th century), but decline over time as the major innovation spreads to more distant populations.

One standard deviation change in the log of genetic distance accounts for 49.18% of the variation in log income differences. Thus, cultural barriers captured by genetic distance seem very strongly associated with income differences.

Genetic distance accounts for an even greater amount (79.59%) of the variation in income differences in 1870, during the Industrial Revolution.

These results strongly suggest that characteristics transmitted from parents to children over long historical spans play a key role in the process of development. In particular, the results are consistent with the view that the diffusion of technology, institutions and norms of behavior conducive to higher incomes, is affected by differences in vertically transmitted characteristics associated with genealogical relatedness: populations that are genetically far apart are more likely to differ in those characteristics, and thus less likely to adopt each other’s innovations over time. The pattern of the effects of genetic distance in space and time, and the interaction with geographical distance, suggest that genetic distance is associated with important barriers to the diffusion of development. Some evidence, particularly the results for European countries, also suggests that these differences may stem in substantial part from cultural (rather than purely genetic) transmission of characteristics across generations.

If we are correct in interpreting our results as evidence for long-term barriers across different populations and cultures, significant reductions in income disparities could be obtained by encouraging policies that reduce those barriers, including efforts to translate and adapt technological and institutional innovations into different cultures and traditions, and to foster cross-cultural exchanges.