Tuesday, 19 July 2011

The "Out of Africa" hypothesis, human genetic diversity, and comparative economic development

This is the title of a new NBER working paper by Quamrul Ashraf, Oded Galor. The abstract reads:
This research argues that deep-rooted factors, determined tens of thousands of years ago, had a significant effect on the course of economic development from the dawn of human civilization to the contemporary era. It advances and empirically establishes the hypothesis that, in the course of the exodus of Homo sapiens out of Africa, variation in migratory distance from the cradle of humankind to various settlements across the globe affected genetic diversity and has had a long-lasting effect on the pattern of comparative economic development that is not captured by geographical, institutional, and cultural factors. In particular, the level of genetic diversity within a society is found to have a hump-shaped effect on development outcomes in both the pre-colonial and the modern era, reflecting the trade-off between the beneficial and the detrimental effects of diversity on productivity. While the intermediate level of genetic diversity prevalent among Asian and European populations has been conducive for development, the high degree of diversity among African populations and the low degree of diversity among Native American populations have been a detrimental force in the development of these regions.
If right, then this research suggests history - in terms of genetic diversity - really does matter!

Important for the Asharf and Galdor argument is that there exists an optimal level of genetic diversity for economic development which reflects the interplay between the conflicting effects of diversity on the development process. The adverse effect pertains to the detrimental impact of diversity on the efficiency of the aggregate production process of an economy. Heterogeneity increases the likelihood of mis-coordination and distrust, reducing cooperation and disrupting the socioeconomic order. Greater population diversity is therefore associated with the social cost of a lower total factor productivity, which inhibits the ability of society to operate efficiently with respect to its production possibility frontier. The beneficial effect of diversity, on the other hand, concerns the positive role of diversity in the expansion of society’s production possibility frontier. A wider spectrum of traits is more likely to be complementary to the development and successful implementation of advanced technological paradigms. Greater heterogeneity therefore fosters the ability of a society to incorporate more sophisticated and efficient modes of production, expanding the economy’s production possibility frontier and conferring the benefits of increased total factor productivity. Higher diversity in a society’s population can therefore have conflicting effects on the level of its total factor productivity. Aggregate productivity is enhanced on the one hand by an increased capacity for technological advancement, while simultaneously diminished on the other by reduced cooperation and efficiency.

May be the Productivity Commission should be researching New Zealand's genetic diversity.

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