Large variation in geographical characteristics exist within the different regions of the world.

For
example, in this table we can already see some correlations between national income and
geographical features (ex: proximity to the tropics).

The idea of geography having effects on countries' development goes back to the XVIII century,
however, it wasn't until the 90s that proper research on this matter was conducted by Jeffrey Sachs.
He claimed that geographical characteristics can affect national income. Example of this factors are
the climate, the accessibility to markets (transport costs), density of population, access to water,
natural resources, disease, productivity of agriculture or environmental shocks.

Tropical areas have disadvantages in relation with food and healthcare production. This fact results in
a great obstacle for technological advance, which made the technological discoveries and advances
arrive later to tropical areas.. This creates a gap between tropical and temperate areas, which
becomes wider as technology advances because of the increasing returns in generating these
technologies. As technology is cumulative, which means that present technological advances of
today allows even more technological advances in the future; that tropical areas are less developed
than non-tropical ones.

Adoption of early technologies

The first huge human development was the transition from hunter-gatherer societies to agricultural
one. This transition to sedentarism ( or beginning of the Neolithic era) determines the long-run
development of regions.

The timing on the transition to the Neolithic era depends greatly on two factors:

● Biogeographical variables: biodiversity (number of plants and animals that can be

domesticated) was an important factor because, through the data, we see that regions
that first domesticated plants and animals had a wider range of animal and vegetal
species to domesticate ( For example Europe, the near east and North Africa)
 ● Horizontal or vertical axis: Continents with vertical axis has less diversion of agricultural
systems, lower population density and less diffusion of technology.

This two geographical factors explain over the 90% of the variance in the timing of Neolithic
Revolution. They also explain half of the variance of current income per capita between nations
today. Which means that the timing of Neolithic revolution matters because the persistence of
technology.

Diseases and development

Some of the most dangerous diseases, like malaria, are found in countries near the equator (mainly
in central Africa). This countries have lower GDP per capita so, apparently the presence of deadly
diseases is a factor to take into account when explaining why African countries are poorer. However,
the correlation between this two factors (malaria and poverty) does not mean that malaria causes
poverty. Malaria is dependant of geography, which means it is not a consequence of poverty. We
know that because, other things equal, the GDP per capita of those countries with malaria
represents one third of countries without malaria.

Countries with endemic malaria have:

● High infant mortality rate

● Counter-productive long-term effects on learning capacity and education because of

anaemia and lost time in school

● Malnutrition

● Less foreign investment and tourism

● Restriction on inner mobility, transmission of ideas and techniques, and development of

infrastructures

Environmental shocks and development

Even though there is correlation between environmental shocks and GDP development, but these is
not the main determinant of a country's development. There are other factors that, combined with
environmental shocks, determines the degree of development of a country.

Transport costs and development

Transport costs (Limao and Venables, 1999; Overman, Redding and Venables, 2003)

Landlocked countries have higher transportation costs, which make trade, transmission of
technology and foreign/intern investment more difficult. Being connected to your neighbours makes
a country better off.
If the distance between a country and the main financial/trading areas is very high, economic
development occurs on a much slower pace.

Local costs are more expensive than international costs. Why?

Trade cost = Fixed cost + Variable cost depending on de distance
Cost/km = TC/km (distance)
The further you go, the lower the impact of the FC per km.

And indicator that relates infrastructures of transportation and economic development is railroads
concentration. In the areas where there is a high density of railroads, economy tends to be better
than areas where this do not occur. For example, railroads in Africa only connects inner countries
with the coast, while there are no connections between African countries. This reduces the African
market integration, by making transportation costs to be much higher.

Natural resources and development

Against what the majority might think, the relation between the natural resources available in a
country and its development is negative. Countries with a lot of natural resources tend to be poorer.
This is mainly because, in this countries, the economy relies in the extraction of those natural
resources, whereas there is no interest in investing on a strong manufacturing industry. At the end, it
is industrial development what makes an economy grow.

Normally, when a country specializes itself to one activity (extracting natural resources, for instance),
the efficiency of the other activities decline, which means that all the products you are not exporting
are going to be imported (as it will be cheaper to buy them outside). By this, we can understand why
the manufacturing industry is not developed in countries where there is a high amount of natural
resources available. This phenomena is also called the Dutch effect (the apparent causal relationship
between the increase in the economic development of a specific sector, for example natural
resources, and a decline in other sectors (like the manufacturing sector or agriculture).

Direct and indirect effects of geography on development

Some countries which were considered rich some centuries ago are now considered poor, and it
happen the same the other way round. This is called the reversal of fortune effect.

This is the case of the European ex-colonies, for instance. Mexico, Cuba or Colombia were considered
rich, and Canada or the US were considered poor. This cannot be due to geography of this territories,
as it haven't changed through the centuries. However, there is another factor that could explain why
this change of paradigm occurred. The main explanation would be the institutions imposed during
the colonization process.

All over South America, Central America and the Caribbean, extractive institutions were imposed by
the Europeans. As this areas where rich in natural resources and had good geography, institutions
like slavery were introduced to extract gold, silver, sugar... Extractive institutions made the future
economic growth of this countries very difficult, to the point that nowadays they are considered
poor.

In North America, on the other hand, more inclusive institutions where established. As there were
not any valuable natural resources, institutions established there were more focused on promoting
investment in the manufacturing industry, which allowed people to accumulate capital, which would
be invest years later, having as a result a developed economy.