Population Diversity, Division of Labor and the Emergence of Trade and State

Abstract

This research explores the emergence and prevalence of economic specialization and trade in pre-modern societies. It advances the hypothesis, and establishes empirically that population diversity had a positive causal effect on economic specialization and trade. Based on a novel ethnic level dataset combining geocoded ethnographic and genetic data, this research exploits the exogenous variation in population diversity generated by the "Out-of-Africa'' migration of anatomically modern humans to causally establish the positive effect of population diversity on economic specialization and the emergence of trade-related institutions, which, in turn, facilitated the historical formation of states. Additionally, it provides suggestive evidence that regions historically inhabited by pre-modern societies with high levels of economic specialization have a larger occupational heterogeneity and are more developed today.

Keywords: Economic Specialization, Division of Labor, Trade, State Formation, Population Diversity, Population Heterogeneity, Genetic Diversity, Diversity, Emergence of State, Persistence, Out of Africa

JEL Classification: D74, F10, N47, O10, O17, Z10