Does genetic proximity to high growth countries affect a country's own growth?

Abstract

While technological advances have effectively reduced the distance that knowledge and innovations have to travel between countries, the literature has found that innovations, technology and growth are still slow to diffuse between countries. We present an econometric model that explains how a country that is genetically closer to other high growth countries can experience higher growth or ‘growth spillovers’. Recent empirical work has found that genetic links matter because countries with common genetic characteristics tend to have common languages, common business practices, and common areas of economic interest which eases the process of interaction. We empirically prove that the effect of genetic proximity to high growth economies can be separated from the impact of geographic proximity or trade links to these countries. Using measures of cross-country genetic links, our empirical results also prove that even after taking both the geographic distance and the amount of trade between countries into account, genetic proximity to high growth economies increases growth in a country.