There is a heated ongoing debate in the field of long term economic development on whether it is geography or ‘institutions’ that has the more important direct effect on current economic performance. However, one area of consensus in this debate is that geography has an indirect effect on economic performance through its influence on the origin of institutions. This consensus provides the motivation for a branch of the literature that seeks the geographic origins of economic institutions in the very long run.
This literature concentrates on the geographic and biogeographic endowments conducive to the onset and diffusion of economic development over the past millennia. Its starting point is the Neolithic revolution (approx. 10,000 B.C.), that is, the transition from hunter-gathering to agriculture and domestication, which led in turn to higher population density, more complex social and economic systems, and the emergence of the state above the tribal level. The conventional explanation for this deep technological and social change maintains that environmental advantages were instrumental in bringing about the increase of agricultural productivity relative to foraging. This, combined with the ability to store food, facilitated population agglomeration and the emergence of a non-food producing elite as well as the creation of rudimentary states to oversee the provision of defense. Although empirical research has found evidence that supports this theory, recent research presents interesting challenges to the received wisdom. A competing theory argues, for example, that the origin of a non-food producing elite and the emergence of more complex social institutions did not depend on the availability of food surplus but was instead a result of the appropriability of cereal crops from farmers.
Bockstette, Valerie, Areendam Chanda and Louis Putterman (2002). “States and Markets: The Advantage of an Early Start.” Journal of Economic Growth, 7(4): 347-69. [Working paper version]
Borcan, Oana, Ola Olsson, Louis Putterman (2014) “State History and Economic Development: Evidence from Six Millennia.” Working Paper.
Boserup, Ester (1965) The Conditions of Agricultural Growth: The Economics of Agrarian Change under Population Pressure, George Allen & Unwin Ltd, London.
Diamond, Jared (1999) Guns, Germs and Steel: The Fates of Human Societies. New York: W. W. Norton.
Gennaioli, Nicola and Ilia Rainer (2007) “The modern impact of precolonial centralization in Africa” Journal of Economic Growth, 12(3): 185-234. [Working paper version]
Mayshar, Joram, Omer Moav, Zvika Neeman and Luigi Pascali (2015) “Cereals, Appropriability and Hierarchy.” Working Paper.
Montesquieu, Charles, 1750. In: Anne M. Cohler, Basia C. Miller and Harold S. Stone (Eds.), 1989. The Spirit of Laws. Cambridge University Press, Cambridge.
North, Douglass (1982) Structure and Change in Economic History. W.W. Norton & Co., New York.
Nunn, Nathan and Diego Puga (2012) “Ruggedness: The Blessing of Bad Geography in Africa.” Review of Economics and Statistics, 94(1): 20-36. [Working paper version]