ARTICLE IN PRESS Available online at www sciencedirect com European Economic Review www elsevier com locate econbase Biogeography and long run economic development Ola Olsson Douglas A Hibbs Jr Department of Economics G oteborg University Vasagatan 1 Box 640 405 30 G oteborg Sweden Received August 2000 accepted May 2003 Abstract The article models the transition from a hunter gatherer economy to agricultural production a crucial event in history which made possible the endogenous technological progress that ultimately led to the Industrial Revolution We further present evidence showing that geographic and initial biogeographic conditions exerted decisive in uence on the location and timing of transitions to sedentary agriculture to complex social organization and eventually to modern industrial production Evidence from a large cross section of countries indicates that the e0ects of geography and biogeography on contemporary levels of economic development are remarkably strong a result that contrasts with several recent studies where the e0ect runs solely through institutions c 2003 Elsevier B V All rights reserved JEL classi cation N10 N50 O10 O41 Keywords Geography Biogeography Economic development Agricultural revolution Institutions Plants and animals Jared Diamond 1 Introduction During recent years there has been an increasing awareness that geography a0ects economic development and growth For instance temperature disease environment and conditions for transport have been shown to in uence agricultural productivity directly Bloom and Sachs 1998 Sachs 2001 Geographical factors are also believed to have played an indirect role by setting the basic conditions in which social Corresponding author E mail addresses ola olsson economics gu se O Olsson dhibbs economics gu se D A Hibbs c 2003 Elsevier B V All rights reserved 0014 2921 see front matter doi 10 1016 j euroecorev 2003 08 010 ARTICLE IN PRESS 2 O Olsson D A Hibbs Jr European Economic Review institutions are formed Acemoglu et al 2001 Easterly and Levine 2003 and by deDning environmental constraints to population growth Kremer 1993 Galor and Weil 2000 The argument made in this paper is that biogeography had a fundamental impact on economic development already in prehistory Favorable biogeographic initial conditions in particular the prevalence of plants and animals suited to domestication expedited the transition from hunter gatherer to sedentary agriculture in advantaged areas leading to the rise of early civilization and conferring a development head start of thousands of years over areas less well endowed In our model of long run economic development we show that the impact of this head start should still be detectable in the contemporary international distribution of prosperity Empirical evidence from a large cross section of countries supports this hypothesis The notion that geography broadly conceived matters for societal development is not new At least as early as the eighteenth century Montesquieu 1750 advanced a theory featuring the political in uence of climate In more recent studies of the links between geography and economic development one regularity always stands out The majority of poor countries in today s world are found in the tropical climate zone near the equator Hall and Jones 1999 Sachs 2001 Among the factors believed to hamper agricultural productivity and development in the tropics are severe heat discontinuous water supply and debilitating diseases Landes 1998 poor photosynthetic potential for annual plants Bloom and Sachs 1998 the absence of winter frosts that kill harmful organisms Masters and McMillan 2001 and in Africa deDcient natural conditions for transport Gallup et al 1999 Some recent work has focused on geography s indirect in uence on today s levels of development through its impact on patterns of colonialism Acemoglu et al 2001 argue that climate and the associated prevalence of mortal diseases a0ected decisively where colonizers from the Western world decided to create permanent settlements In regions with high mortality rates extractive institutions were built whereas durable settlements with good institutions typically were installed in colonies with a temperate climate such as North America Australia and New Zealand In two related papers Rodrik et al 2002 and Easterly and Levine 2003 attempt to determine empirically whether the geography hypothesis of a direct in uence on development or the institutions hypothesis of an indirect e0ect of geography via institutions has better explanatory power They conclude that geography s e0ects are indirect running entirely through institutional development which supports the general line of argument in Acemoglu et al 2001 However whereas Acemoglu et al start their analysis at the onset of colonization around 1500 AD we contend that a more deDning historical era the one that ultimately gave Europe the ability to colonize the rest of the world is the period of the Neolithic revolution some 10 000 years ago This fundamental shift in economic production and associated living conditions has not often been analyzed by economists Early attempts at establishing analytical frameworks with some focus on property rights were provided by Smith 1975 and North 1981 Chapter 7 Drawing on a large archaeological and anthropological literature Morand 2001 uses a Nash bargaining setup to model the transition from hunting gathering to settled agriculture and then ARTICLE IN PRESS O Olsson D A Hibbs Jr European Economic Review 3 from agriculture to industrial production As one of the primary reasons for the Drst transition Morand identiDes climatic stress at the end of the Pleistocene era in combination with some groups conDnement to oases of relative aLuence surrounded by desert like environments Our research is also related to long run models of development that focus on the relationships between population and economic development in a Malthusian tradition Galor and Weil 2000 model the transition from a Malthusian regime when technological progress is slow and population growth is small to a Modern Growth regime when growth rates are high and population growth small or negative The key factor behind this change according to Galor and Weil is that technological progress eventually creates a disequilibrium that induces parents to switch from child quantity to child quality education Geography plays a role in the background since the Dxed quantity and quality of land
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