Article Summary: “Biogeography and Long-Run Economic Development” by Olsson and Hibbs

Title: Biogeography and Long-Run Economic Development
Author: Ola Olsson and Douglass Hibbs
Scope: 4 stars
Readability: 3 stars
My personal rating: 5 stars
See more on my book rating.

Topic of Book

The authors use statistical analysis to determine the relative impacts of geography and institutions on economic development.

My Comments

This is an important statistical analysis showing the critical factor of history and geography of a nation’s current level of development.  Most researchers stress short-term factors, such as economic policy, political leaders and institutions instead of deeper factors.

I am, however, not convinced by their “head start” theory. Northwest Europe was very late to develop agriculture compared to Middle East, China and India, but Northwest Europe was the first region to industrialize. The timing of the transition to agriculture is very important for understanding the development of the Eurasian civilizations compared to the rest of the world, but it not very useful in accounting for development levels among those Eurasian civilizations.

Key Take-aways

  • Geography accounts for much of the differences between rich countries and poor countries today (40-50 percent of the variance).
  • The key factor is whether a region had plants and animals suitable for domestication 5000 years ago. Regions with this advantage gained a head start over other regions, that they were never able to make up.
  • The later the transition to agriculture, the later the transition to an industrial economy.
  • Political and economic institutions were only able to develop in regions with that head start. So good institutions are not the ultimate cause of economic growth, as many theorists hold.

Important Quotes from Book

The argument made in this paper is that exogenous geography and initial biogeographic endowments – and the diverging historical paths that these give rise to – in fact account for a significant part of the highly unequal distribution of productive income in the world. Favorable biogeographic initial conditions – in particular the prevalence in prehistory of plants and animals suited to domestication – led in some parts of the world to an early transition to sedentary agriculture and the rise of “civilization”, which conferred on some societies a development head start of thousands of years over less fortunate areas. We argue in this paper that the impact of this head start can still be detected in the contemporary international distribution of prosperity.

A problem with demographic and institutional explanations of long run economic development, however, is that the factors underlying population growth and the development of good institutions are not identified.

The main contention of this paper is that the ultimate factors in historical economic development – shaping the broad contours of population growth, and the capacity for institutional development and technological change – are geography and biogeography.

Yet when thinking about geography and economic development, two empirical regularities inevitably stand out: First, the majority of poor countries in today’s world are found in the tropical climate zone; near the equator. Second, peoples from Eurasia (above all from the Western part) developed superior technology and colonized and dominated lands on all other continents.

Western Eurasia in particular, but also East Asia, had superior initial biogeographic conditions for agricultural experimentation. Why was this the case? The answer lies in the continent’s geography and climate. First, Eurasia is by far the largest landmass on the planet and it is naturally endowed with the greatest variation of species. Second, the early success of food production in the Fertile Crescent, and its rapid diffusion to Europe and North Africa, can largely be explained by its Mediterranean climate. All the major crops cultivated in the Fertile Crescent were annual grasses… a Mediterranean climate with wet winters and dry summers is particularly favorable for annual grasses. There are Mediterranean zones also in other parts of the world – in Chile, South Africa, Southern California, and Northern Australia – but none of these were nearly as big as the Eurasian zone.

The fundamental assumption in our model is rather that knowledge growth before the appearance of sedentary agriculture is opportunity-driven; it is a function of the productive potential of the environment. We further believe that technological advance temporarily results in rising living standards, which in turn allow population increases.

The rate of knowledge growth is the share of the labor force in the non-food sector plus diffusion of knowledge from other continents.

The important insight from this result is that, all else equal, the later the transition to agricultural production, the later the transition to an industrial economy.

All else equal, the larger the size of a continent or landmass, the greater the biodiversity and the greater the number of species suitable for domestication. The greater the East-West orientation of the major axis, the easier was the diffusion of agricultural innovations between areas. A temperate climate, and in particular the Mediterranean subtype, favors annual grasses like wheat and barley. Geography (inclusive of climate) affects the number of plant and animal species suited to domestication, which in turn determined the timing of the agricultural revolution and the subsequent evolution of endogenously created knowledge, the formation of modern sociopolitical institutions and the onset of sustained growth.

Geography (Climate, Latitude, Axis and Size) explain 80% of the variance of the international distribution of heavy seeded plants and large domesticable animals that are known to have existed in prehistory.

Biogeography (# large wild grains and domesticatable animals) explains 67 percent of the variance in calibrations of the number of years since the transition to agricultural production.

The first three regression experiments indicate that geography and biogeography are able to account for between 40 and 50 percent of the variance in 1997 log incomes per capita. Our crude measurement of biogeographic endowments fits almost 40 percent of the international variation all by itself.

Including political and social institutions explain the lion’s share of cross-national variance in log output per capita, with R2 ‘ s running from .75 to .80.

Biogeography and Geography are truly exogenous, while institutions are not.

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