The Diffusion of Development

Abstract

This paper studies the barriers to the diffusion of development across countries from a longterm perspective. We find that genetic distance, a measure associated with the amount of time elapsed since two populations’ last common ancestors, bears a statistically and economically significant relationship with pairwise income differences, even when controlling for various other measures of geographical, climatic, cultural and historical differences. We provide an economic interpretation of these findings, within a framework in which (a) genetic distance captures divergence in characteristics, including cultural traits, that are transmitted vertically across generations within populations over the long term, and (b) such differences in verticallytransmitted characteristics act as barriers to the horizontal diffusion of innovations from the world technological frontier. The empirical evidence over time and space is consistent with this barriers interpretation.