<p>If explanation consists in identifying causal factors and assessing their importance, much depends on how far back - in time, and in links in a causal chain - one is trying to go. If one looks for the proximate causes of differences in levels of economic development, considering only current or recent factors, then explanations in terms of inherited physical and human capital are likely to play a central role, with governance and cultural factors also important.  Geography also plays a role, especially in enriching countries with large oil reserves, and acting as a constraint on development in regions of water scarcity.</p>

<p>If one seeks to trace the causal chain much further back, then a case can be made that the role of geography becomes much more important.  In his book <a href="https://en.wikipedia.org/wiki/Guns,_Germs,_and_Steel" rel="nofollow">Guns, Germs and Steel</a>, Jared Diamond argues that the more advanced development of Eurasia relative to other parts of the world can be largely explained in terms of what can broadly be described as geographical factors. However, the factors he describes are not simple.  He refers for example to the distributions of plant and animal species suitable for domestication, to the distributions of diseases, and - in respect of Europe's development in the mediaeval and early modern period - to the effects of  geography favouring a division into relatively small nation-states, with the resulting competition providing a spur to development.  Even if not every detail of his argument is persuasive, he makes a strong case overall that geographical factors should play a major role in very long-term explanations of differences in development.</p>

CC BY-SA 3.0
2016-02-25T11:51:45.087Z
Well, along with the research on cognitive effects of melanin, there is even micro evidence of how temperature affects output. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2799321/
D J Sims
CC BY-SA 3.0
2016-02-25T11:53:33.563Z
The guns, germs, steel argument relies on thoroughly refuted claims like 95% of Native Americans dying from disease and the initial native populations far exceeding their carrying capacity  http://www.livinganthropologically.com/anthropology/guns-germs-and-steel/ . Also, Diamonds claims are completely unfalsifiable,  while climate geography is an easily testable factor with enormous explanatory success. Still, he wrote an interesting book I agree.
D J Sims
CC BY-SA 3.0
2016-02-25T11:16:49.017Z
2016-02-25T11:16:49.017Z
Adam Bailey
<p>If this was the case, you would expect countries geographically close to each other to have similar economic conditions. However, we can see large variation within, for example, continents.</p>

<p>See, for example, this country map of nominal GDP per capita from Wikipedia: <a href="https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29_per_capita#/media/File:GDP_per_capita_%28nominal%29_2014.png" rel="nofollow">https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29_per_capita#/media/File:GDP_per_capita_%28nominal%29_2014.png</a></p>

<p>What we currently observe as economic development is a result of past monetary/fiscal policy decisions, the reserve of natural resources a country has and a multitude of other factors which are (mostly) independent of geographical location. You might argue that neighbouring countries often have similar growth paths due to similar natural and political conditions, but this isn't always the case.</p>

CC BY-SA 3.0
2016-02-25T08:25:26.930Z
Besides a single extreme case (north korea) and maybe some oil producers and the like, the countries look geographically grouped to me. https://en.m.wikipedia.org/wiki/File:GDP_per_capita_(nominal)_2014.png
D J Sims
CC BY-SA 3.0
2016-02-25T08:43:51.467Z
Geographical location definitely plays some part in the growth path, but it doesn't explain for the factors which economical growth models take into account. For example human capital growth, technological growth, monetary growth, etc.
John L.
CC BY-SA 3.0
2016-02-25T08:53:25.377Z
It's questionable that human capital really "grows" rather than new opportunities emerging to utilize it. Technological growth is a separate discussion but the largest TFP growth estimates typically exclude land inputs such as fossil fuels. Nevertheless I see your point, I was thinking more about cross-sectional models than longitudinal ones, and I edited the question to reflect that.
D J Sims
CC BY-SA 3.0
2016-02-25T09:02:47.587Z
I do agree with your point about human capital and would consider human capital growth more of a result of economic growth as educational institutions can improve. This would (somewhat) imply that IQ growth might be a result of economic growth rather than vice versa. Definitely an interesting subject.
John L.
CC BY-SA 3.0
2016-02-25T09:10:20.223Z
IQ can be affected by natural selection, epigenetic and prenatal factors to display the kind of very rapid, single-generation changes that you describe. I would certainly consider that economic growth affects IQ, although it would not necessarily have a direct and linear effect. Here's an interesting paper you might want to look at  https://www.aeaweb.org/articles.php?doi=10.1257/000282803769206214
D J Sims
CC BY-SA 3.0
2016-02-25T08:18:32.453Z
2016-02-25T08:23:35.103Z
2016-02-25T08:23:35.103Z
John L.
<p>Dani Rodrik, Arvind Subramanian, Francesco Trebbi have a paper on "<a href="http://faculty.arts.ubc.ca/ftrebbi/research/institutionsruleJEG.pdf">Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development</a>", Journal of Economic Growth, June 2004, 9(2): pp.131-165.</p>

<p>They estimate the respective contributions of institutions, geography, and trade in determining income levels around the world, using recently developed instruments for institutions and trade. They results indicate that the quality of institutions trumps' everything else. They add that once institutions are controlled for, <strong>measures of geography have at best weak direct effects on incomes, although they have a strong indirect effect by influencing the quality of institutions</strong>.</p>

CC BY-SA 3.0
2016-02-26T07:22:20.820Z
"Institutions" is a vaguely defined and irrigorous concept, which could be taken to encompass absolutely any human activity.
D J Sims
CC BY-SA 3.0
2016-02-26T07:29:37.763Z
But, I think that's the best answer for now because it shows data.
D J Sims
CC BY-SA 3.0
2016-02-26T06:41:27.423Z
2016-02-26T06:41:27.423Z
emeryville
<p>Just wondered if anyone considered this. Do simple geographic factors explain differences in economic development?</p>

<p><a href="https://i.sstatic.net/heeja.gif" rel="nofollow noreferrer"><img src="https://i.sstatic.net/heeja.gif" alt="enter image description here"></a></p>

CC BY-SA 3.0
2016-02-25T08:28:59.507Z
Some empirical data if you're interested. Melanin is due to sunlight which is an exogenous geographic factor. https://majorityrights.com/weblog/comments/intelligence_and_skin_color/
D J Sims
CC BY-SA 3.0
2016-02-25T09:01:27.743Z
*Melanin has also been found to be related with altitude, air pressure, humidity, and other things associated with environmental oxidants.  https://www.researchgate.net/publication/265086475_Why_complex_cognitive_ability_increases_with_absolute_latitude
D J Sims
CC BY-SA 3.0
2016-02-25T15:15:11.583Z
Are you really asking about the general relationship between geographic factors and economic development? Because the body of the question and your comments seem to persist in driving the conversation back to the specific hypothesis climate => IQ => development. Please be sure to ask the question you actually want people to answer.
Ubiquitous
CC BY-SA 3.0
2016-02-25T15:58:33.977Z
The former. Im just responding to others comments. Feel free to add to the discussion
D J Sims
CC BY-SA 3.0
2016-02-26T13:53:15.533Z
What's the source of this chart?
BKay
<macroeconomics>
Can geography explain differences in economic development between present day economies?
D J Sims
# Can geography explain differences in economic development between present day economies?

(Asked by: username_0 on 2016-02-25)

Just wondered if anyone considered this. Do simple geographic factors explain differences in economic development?

[![enter image description here](https://i.sstatic.net/heeja.gif)](https://i.sstatic.net/heeja.gif)

**Tags:** macroeconomics

> **Comments:**
> **username_0**: Some empirical data if you're interested. Melanin is due to sunlight which is an exogenous geographic factor. https://majorityrights.com/weblog/comments/intelligence_and_skin_color/  
> **username_0**: *Melanin has also been found to be related with altitude, air pressure, humidity, and other things associated with environmental oxidants.  https://www.researchgate.net/publication/265086475_Why_complex_cognitive_ability_increases_with_absolute_latitude  
> **username_1**: Are you really asking about the general relationship between geographic factors and economic development? Because the body of the question and your comments seem to persist in driving the conversation back to the specific hypothesis climate => IQ => development. Please be sure to ask the question you actually want people to answer.  
> **username_0**: The former. Im just responding to others comments. Feel free to add to the discussion  
> **username_2**: What's the source of this chart?  

---

## 3 answers

### Answer by username_5 on 2016-02-26. Score: 5 | Accepted answer

Dani Rodrik, Arvind Subramanian, Francesco Trebbi have a paper on "[Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development](http://faculty.arts.ubc.ca/ftrebbi/research/institutionsruleJEG.pdf)", Journal of Economic Growth, June 2004, 9(2): pp.131-165.

They estimate the respective contributions of institutions, geography, and trade in determining income levels around the world, using recently developed instruments for institutions and trade. They results indicate that the quality of institutions trumps' everything else. They add that once institutions are controlled for, **measures of geography have at best weak direct effects on incomes, although they have a strong indirect effect by influencing the quality of institutions**.

> **Comments:**
> **username_0**: "Institutions" is a vaguely defined and irrigorous concept, which could be taken to encompass absolutely any human activity.  
> **username_0**: But, I think that's the best answer for now because it shows data.  

---

### Answer by username_3 on 2016-02-25. Score: 2

If explanation consists in identifying causal factors and assessing their importance, much depends on how far back - in time, and in links in a causal chain - one is trying to go. If one looks for the proximate causes of differences in levels of economic development, considering only current or recent factors, then explanations in terms of inherited physical and human capital are likely to play a central role, with governance and cultural factors also important. Geography also plays a role, especially in enriching countries with large oil reserves, and acting as a constraint on development in regions of water scarcity.

If one seeks to trace the causal chain much further back, then a case can be made that the role of geography becomes much more important. In his book [Guns, Germs and Steel](https://en.wikipedia.org/wiki/Guns,_Germs,_and_Steel), Jared Diamond argues that the more advanced development of Eurasia relative to other parts of the world can be largely explained in terms of what can broadly be described as geographical factors. However, the factors he describes are not simple. He refers for example to the distributions of plant and animal species suitable for domestication, to the distributions of diseases, and - in respect of Europe's development in the mediaeval and early modern period - to the effects of geography favouring a division into relatively small nation-states, with the resulting competition providing a spur to development. Even if not every detail of his argument is persuasive, he makes a strong case overall that geographical factors should play a major role in very long-term explanations of differences in development.

> **Comments:**
> **username_0**: Well, along with the research on cognitive effects of melanin, there is even micro evidence of how temperature affects output. http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2799321/  
> **username_0**: The guns, germs, steel argument relies on thoroughly refuted claims like 95% of Native Americans dying from disease and the initial native populations far exceeding their carrying capacity  http://www.livinganthropologically.com/anthropology/guns-germs-and-steel/ . Also, Diamonds claims are completely unfalsifiable,  while climate geography is an easily testable factor with enormous explanatory success. Still, he wrote an interesting book I agree.  

---

### Answer by username_4 on 2016-02-25. Score: 2

If this was the case, you would expect countries geographically close to each other to have similar economic conditions. However, we can see large variation within, for example, continents.

See, for example, this country map of nominal GDP per capita from Wikipedia: <https://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29_per_capita#/media/File:GDP_per_capita_%28nominal%29_2014.png>

What we currently observe as economic development is a result of past monetary/fiscal policy decisions, the reserve of natural resources a country has and a multitude of other factors which are (mostly) independent of geographical location. You might argue that neighbouring countries often have similar growth paths due to similar natural and political conditions, but this isn't always the case.

> **Comments:**
> **username_0**: Besides a single extreme case (north korea) and maybe some oil producers and the like, the countries look geographically grouped to me. https://en.m.wikipedia.org/wiki/File:GDP_per_capita_(nominal)_2014.png  
> **username_4**: Geographical location definitely plays some part in the growth path, but it doesn't explain for the factors which economical growth models take into account. For example human capital growth, technological growth, monetary growth, etc.  
> **username_0**: It's questionable that human capital really "grows" rather than new opportunities emerging to utilize it. Technological growth is a separate discussion but the largest TFP growth estimates typically exclude land inputs such as fossil fuels. Nevertheless I see your point, I was thinking more about cross-sectional models than longitudinal ones, and I edited the question to reflect that.  
> **username_4**: I do agree with your point about human capital and would consider human capital growth more of a result of economic growth as educational institutions can improve. This would (somewhat) imply that IQ growth might be a result of economic growth rather than vice versa. Definitely an interesting subject.  
> **username_0**: IQ can be affected by natural selection, epigenetic and prenatal factors to display the kind of very rapid, single-generation changes that you describe. I would certainly consider that economic growth affects IQ, although it would not necessarily have a direct and linear effect. Here's an interesting paper you might want to look at  https://www.aeaweb.org/articles.php?doi=10.1257/000282803769206214  

---

