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Cultural Diversity, Geographical Isolation, and the Origin of the Wealth of Nations

This research argues that variations in the interplay between cultural assimilation and cultural di¤usion have played a signi?cant role in giving rise to di¤erential patterns of economic devel- opment across the globe. Societies that were geographically less vulnerable to cultural di¤usion bene?ted from enhanced assimilation, lower cultural diversity, and more intense accumulation of society-speci?c human capital. Thus, they operated more e¢ ciently with respect to their production-possibility frontiers and ?ourished in the technological paradigm that characterized the agricultural stage of development. The lack of cultural di¤usion 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-o¤ 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.

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Paper provided by Brown University, Department of Economics in its series Working Papers with number 2011-16.

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Date of creation: 2011
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Handle: RePEc:bro:econwp:2011-16
Contact details of provider: Postal: Department of Economics, Brown University, Providence, RI 02912

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