NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Why Tropical Countries are Underdeveloped

"In 1820, GNP per capita in the tropical regions was roughly 70 percent of GNP in the temperate-zone. By 1992, GNP per capita in the tropical regions was 25 percent of that in the temperate-zone."

The strongest link in explaining the wealth and poverty of nations is the relationship between ecological zones and per capita income, according to NBER Research Associate Jeffrey Sachs. Yet, most recent cross-country analyses of economic growth have neglected the importance of physical geography.

Despite their varied economic, political, and social histories, almost all of the tropical countries remain underdeveloped at the start of the 21st century. Only two tropical-zone countries, Hong Kong and Singapore, rank among the 30 countries classified as high-income by the World Bank. All of the high-income regions -- North America, Western Europe, Northeast Asia, the Southern Cone of Latin America, and Oceania -- are outside the tropics. When temperate-zone economies are not rich, there is typically a straightforward explanation, such as decades under communism. Sea navigable regions are generally richer than land-locked nations. Those that are both tropical and land-locked - including Bolivia, Chad, Niger, Mali, Burkina Faso, Uganda, Rwanda, Burundi, Central African Republic, Zimbabwe, Zambia, Lesotho and Laos - are among the very poorest in the world.

In Tropical Underdevelopment (NBER Working Paper No. 8119), Sachs uses geographic information system mapping to combine climatic and economic data. He observes that in 1820, GNP per capita in the tropical regions was roughly 70 percent of GNP in the temperate-zone. By 1992, GNP per capita in the tropical regions was 25 percent of that in the temperate-zone. Thus, between 1820 and1992, GNP per capita in the temperate region grew at an average annual rate of 1.4 percent, compared with 0.9 percent a year in the non-temperate region.

Between 1960 and 1992, both regions grew at about 2.3 percent per year. This reflects fast growth in non-temperate zone Asia of 2.9 percent per year, and continued poor performance in Africa and Latin America.

At the core of this long-term growth was the continued development of technology, a process that has benefitted the temperate-zone countries much more than the tropics. Production technology in the tropics has lagged behind temperate-zone technology in the two critical areas of agriculture and health. The difficulty of mobilizing energy resources in tropical economies also has contributed to the income gap between climate zones. The problems of applying temperate-zone technological advances to the tropical setting have amplified these factors. Agricultural, health, and some manufacturing-related technologies that could diffuse within ecological zones could not diffuse across them.

For the major crops (rice, maize, and wheat), productivity is considerably higher in the temperate-zone than in the tropical-zone: Sachs estimates that in 1995, productivity per hectare of grain produced was approximately 50 percent higher in temperate-zone countries. The explanation lies in soil formation and erosion, pests and parasites, water availability, and the effects of tropical climates on plant respiration. Poor nutrition, resulting from poor agricultural productivity, in turn contributes to poor health. Sachs argues that economic development in tropical eco-zones requires a concerted international effort: agricultural technologies must be specific to the needs of tropical economies.

The burden of disease is considerably higher in the tropics than in temperate climates. Even after controlling for GNP per capita, health outcomes are far better in temperate-zone countries: infant mortality in temperate-zone countries is 50 percent lower; life expectancy in temperate countries is 8 percent higher. Infectious diseases affected all parts of the world in the 19th century. Temperate-zone infectious diseases were partially brought under control through a combination of improved nutrition, societal adjustment to diseases, improved public sanitation, and the introduction of immunization. Tropical vector-borne diseases, such as malaria and helminthic infections, have proved much harder to control. Ecology affects the transition of many important diseases, some of which are now confined to tropical countries.

The income gap also has been amplified in the tropics as poor public health and weak agricultural technology have combined to slow the demographic transition from high fertility and mortality rates to low fertility and mortality rates. Imbalances in geopolitical power too have played a role, for example the domination of global financial and development institutions by the rich, temperate-zone countries. This in turn might help to explain why the importance of physical geography in the development debate, and in framing development policies, has been neglected.

-- Andrew Balls


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