The Globe as a Network: Geography and the Origins of the World Income Distribution

In this paper I develop a quantitative dynamic spatial model of global economic development over the long run. There is an agricultural (ancient) sector and a non-agricultural (modern) sector. Innovation, technology diffusion, and population growth are endogenous. A set of plausible parameter restrictions makes this model susceptible to analysis using classic network theory concepts. Aggregate connectivity is summarized by the largest eigenvalue of the matrix of inverse iceberg transport costs, and the long-run path of the world economy displays threshold behavior. If transport costs are high enough, the world remains in a stagnant, Malthusian steady state; if they are low enough enough, this sets off an endogenous process of sustained growth in population and income. Taking the model to the data, I divide the world into 16,000 1 degree by 1 degree quadrangles. I infer bilateral transport costs by calculating the cheapest route between each pair of locations given the placement of rivers, oceans and mountains. I infer a series of global transport networks using historical estimates of the costs of transport over land and water and their evolution over time. I then simulate the evolution of population and income from the year 1000 until the year 2000 CE. I use the model to calculate two sets of location-specific efficiency parameters, one for the ancient sector and one for the modern sector, that rationalize both the year 1000 population distribution and the year 2000 distribution of income per capita. I then calculate the relative contributions of each set of efficiency wedges, and key historical shifts in transport costs, to the year 2000 variance of per-capita real income.