The transition from a hunter-gatherer economy to agricultural production, which made possible the endogenous technological progress that ultimately led to the Industrial Revolution, is one of the most important events in thousands of years of humankind's economic development. In this paper we present theory and evidence showing that geographic and initial biogeographic conditions exerted decisive influence on the location and timing of transitions to sedentary agriculture, to complex social organization and, eventually, to modern industrial production. Evidence from a large cross-section of countries indicates that the effects of geography and biogeography on contemporary levels of economic development are remarkably strong.

The level of ethnic diversity is believed to have significant consequences for economic and political development within countries. In this article, we provide a theoretical and empirical analysis of the determinants of ethnolinguistic diversity in the world. We introduce a model of cultural and genetic drift where new groups endogenously emerge among peripheral populations in response to an insufficient supply of collective goods. In line with our model, we find that the duration of human settlements since prehistoric times has a strong positive association with current levels of ethnolinguistic diversity. Diversity is further negatively correlated with the length of modern state experience and with distance from the equator. Our results are thus consistent with both "evolutionary" and "constructivist" hypotheses of ethnolinguistic fractionalization.

The presence of a state is one of the most reliable historical predictors of social and economic development. In this article, we complete the coding of an extant indicator of state presence from 3500 BCE forward for almost all but the smallest countries of the world today. We outline a theoretical framework where accumulated state experience increases aggregate productivity in individual countries but where newer or relatively inexperienced states can reach a higher productivity maximum by learning from the experience of older states. The predicted pattern of comparative development is tested in an empirical analysis where we introduce our extended state history variable. Our key finding is that the current level of economic development across countries has a hump-shaped relationship with accumulated state history. Keywords State historyWe are grateful for useful comments from Carl-Johan Dalgaard, Jakob Gerner Hariri, Sascha Becker and four anonymous referees and from seminar participants at University of Copenhagen and Brown University. We also thank Taewan Roh and Nicholas Carter for valuable research assistance. Electronic supplementary materialThe online version of this article (https://doi.org/10.1007/s10887-017-9152-0) contains supplementary material, which is available to authorized users.

The most important event in human economic history before the industrial revolution was the Neolithic transition from a nomadic hunter-gatherer lifestyle to sedentary agriculture, beginning approximately 10,000 years ago. The transition made possible the human population explosion, the rise of non-food-producing specialists, and the acceleration of technological progress that led eventually to the industrial revolution. But the transition occurred at different times in different regions of the world, with big consequences for the present-day economic conditions of populations indigenous to each region. In this article, we show that differences in biogeographic initial conditions and in geography largely account for the different timings of the Neolithic transition and, thereby, ultimately help account for the 100-fold differences among the prosperity of nations today. The effects of biogeography and geography on the wealth of nations are partly mediated by the quality of present-day institutions but also are partly independent of institutional quality.

Is social capital always important for economic growth? A number of recent micro studies suggest that interpersonal trust and social capital will have its greatest impact on economic performance when court institutions are relatively weak. The conventional wisdom from macro studies, however, is that social capital is unconditionally good for growth. On the basis of the micro evidence, we outline an investment game between a producer and a lender in an incomplete-contracts setting. A key insight is that social capital will have the greatest e¤ect on the total surplus from the game at lower levels of institutional strength and that the e¤ect of social capital vanishes when institutions are very strong. When we bring this prediction to an empirical cross-country growth regression, it is shown that the marginal e¤ect of social capital (in the form of interpersonal trust) decreases with institutional strength. Our results imply that a one standard deviation rise in social capital in weakly institutionalized Nigeria should increase economic growth by 1.8 percentage points, whereas the same increase in social capital only increases growth by 0.3 percentage points in strongly institutionalized Canada.