Genetic diversity and development

What can explain the persistent differences in development acorss the world? While the dispersion of income has increase with the Industrial Revolution, it was already very high before that. Some have claimed that the timing of the transition for hunting and gathering to agriculture during the Neolithic Revolution is crucial, in other words the luck of geography is determinant. But maybe genes are more important.

This is what Oded Galor and Quamrul Ashraf claim. Specifically, they say that genetic diversity within a population can have important effects on the development of an economy. On the one hand, genetic diversity leads to lower social cohesion, and therefore mistrust and coordination failures, which leads to a depressed economy. On the other hand, genetic diversity allows to exploit complementarities and thus increase (faster) total factor productivity. Thus the impact of geeneti diversity is ambiguous.

The empirical analysis reveals that diversity is beneficial at low levels of diversity, and detrimental at high levels. This analysis was performed using expected heterozygosity at the ethnicity level: what is the likelihood that two random people form the same ethnicity would share genes. In this, distance from East Africa, following the migration patterns of early humans, proves particularly useful.

Looking at data for AD 1 to 1500, where economic development can be somewhat reliably be measured by population density (this was a Malthusian world after all), the authors claims that between 15% and 42% of economic development dispersion across the world can be explained by genetic diversity. Surely not negligible. And intriguing.