Working Paper: NBER ID: w17640
Authors: Quamrul Ashraf; Oded Galor
Abstract: This research argues that variations in the interplay between cultural assimilation and cultural diffusion have played a significant role in giving rise to differential patterns of economic development across the globe. Societies that were geographically less vulnerable to cultural diffusion benefited from enhanced assimilation, lower cultural diversity, and more intense accumulation of society-specific human capital. Thus, they operated more efficiently with respect to their production-possibility frontiers and flourished in the technological paradigm that characterized the agricultural stage of development. The lack of cultural diffusion and its manifestation in cultural rigidity, however, diminished the ability of these societies to adapt to a new technological paradigm, which delayed their industrialization and, hence, their take-off to a state of sustained economic growth. The theory thus contributes to the understanding of the advent of divergence and overtaking in the process of development. Consistently with the theory, the empirical analysis establishes that (i) geographical isolation prevalent in pre-industrial times (i.e., prior to the advent of airborne transportation technology) has had a persistent negative impact on the extent of contemporary cultural diversity; (ii) pre-industrial geographical isolation had a positive impact on economic development in the agricultural stage but has had a negative impact on income per capita in the course of industrialization; and (iii) cultural diversity, as determined exogenously by pre-industrial geographical isolation, has had a positive impact on economic development in the process of industrialization.
Keywords: Cultural Diversity; Economic Development; Geographical Isolation
JEL Codes: N00; O14; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Geographical isolation in preindustrial times (N93) | Contemporary cultural diversity (Z19) |
| Preindustrial geographical isolation (N93) | Economic development during the agricultural stage (O55) |
| Preindustrial geographical isolation (N93) | Income per capita during industrialization (N13) |
| Cultural diversity (Z10) | Economic development during industrialization (O14) |