Populations, not Nations, Dictate Development

Monday, January 12th, 2015

One of the more intriguing empirical regularities in recent economic growth research involves population origins:

Rather than thinking about rich and poor countries, work by Louis Putterman and David Weil tells us to think about rich and poor population groups (Europeans and Native Americans, for example). Countries are rich if their population is made up of rich population groups, and vice versa. The U.S. is rich because it has lots of European descendants, and relatively few Native American descendants. Mexico, in contrast, is relatively poor because it has a few European descendants but lots of Native American descendants.

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As an example, the weighted state history for the U.S. is a weighted average of the state history of England, Germany, Italy, etc.. (quite long) as opposed to the state history of North America (quite short).

The length of time that populations have had settled agriculture and organized states is highly correlated with output per worker today. Countries that have more history with economic organization are richer today.

Spolaore and Wacziarg’s next table shows that even holding those features constant, the share of Europeans in the population of a country is highly correlated with output per worker today. The upshot is that Europeans and their descendants are rich (as a group), wherever they are in the world, but not so for other population groups.

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