Abstract
It is a well known fact that economic development and distance to the equator are positively correlated variables in the world today. It is perhaps less well known that as recently as 1500 C.E. it was the other way around. The present paper provides a theory of why the ‘latitude gradient’ changed sign in the course of the last half millennium. In particular, we develop a dynamic model of economic and physiological development in which households decide upon the number and nutrition of their offspring. In this setting we demonstrate that relatively high metabolic costs of fertility, which may have emerged due to positive selection towards greater cold tolerance in locations away from the equator, would work to stifle economic development during pre-industrial times, yet allow for an early onset of sustained growth. As a result, the theory suggests a reversal of fortune whereby economic activity gradually shifts away from the equator in the process of long-term economic development. Our empirical results give supporting evidence for our hypothesis.
Highlights
It is a well-known regularity that economic development tends to increase as one moves away from the equator
The substantive implication of this “latitude gradient in body size” is that individuals living in colder climates would end up facing higher metabolic costs of fertility, on purely physiological grounds, since these costs are increasing in the body mass of the individual
The key mechanism of unified growth theory (UGT) that explains the onset of the fertility transition, mass education, and the take-off from stagnation to modern growth is based on the interaction of advancing technological progress with the child quantity-quality trade-off: Parents start investing in child education and reduce fertility when technological progress increases the return to education sufficiently strongly (Galor & Weil, 2000)
Summary
It is a well-known regularity that economic development tends to increase as one moves away from the equator. As technological change makes formal education more attractive, it is likely to be adopted sooner in societies where the relative costs of child quantity are greater; that is, places inhabited by bigger individuals, farther away from the equator This is where the latitude-productivity nexus gradually begins its turnaround: As educational investments are undertaken, fertility declines and economic growth takes off. The key mechanism of UGT that explains the onset of the fertility transition, mass education, and the take-off from stagnation to modern growth is based on the interaction of advancing technological progress with the child quantity-quality trade-off: Parents start investing in child education and reduce fertility when technological progress increases the return to education sufficiently strongly (Galor & Weil, 2000).
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