Productivity and Diversity

From The “Out of Africa ”Hypothesis, Human Genetic Diversity, and Comparative Economic Development by Quamrul Ashrafy and Oded Galorz.

Consistent with the predictions of the theory, the empirical analysis finds that the level of genetic diversity within a society has a hump-shaped effect on development outcomes in the pre-colonial as well as in 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 the 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. This paper thus highlights one of the deepest channels in comparative development, pertaining not to factors associated with the dawn
of complex agricultural societies as in Diamond’s (1997) influential hypothesis, but to conditions innately related to the very dawn of mankind itself.

The hypothesis rests upon two fundamental building blocks. First, migratory distance from the cradle of humankind in East Africa had an adverse effect on the degree of genetic diversity within ancient indigenous settlements across the globe. Following the prevailing hypothesis, commonly known as the serial-founder effect, it is postulated that, in the course of human expansion over planet Earth, as subgroups of the populations of parental colonies left to establish new settlements further away, they carried with them only a subset of the overall genetic diversity of their parental colonies. Indeed, as depicted in Figure 1, migratory distance from East Africa has an adverse effect on genetic diversity in the 53 ethnic groups across the globe that constitute the Human Genome Diversity Cell Line Panel.

Second, there exists an optimal level of diversity for economic development, refl‡ecting 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.