Seasons, Savings, and GDP

40 Pages Posted: 17 May 2006

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2007

Abstract

The industrial revolution and the subsequent industrialization of the economies occurred first in temperate regions. We argue that this and the associated positive correlation between absolute latitude and GDP per capita is due to the fact that countries located far from the equator suffered more profound seasonal fluctuations in climate, namely stronger and longer winters. We propose a growth model of biased innovations that accounts for these facts and show that countries located in temperate regions were more likely to create or adopt capital intensive modes of production.

The intuition behind this result is that savings are used to smooth consumption; therefore, in places where output fluctuations are more profound, savings are bigger. Because the incentives to innovate depend on the relative supply factors, economies where savings are bigger are more likely to create or adopt capital intensive technologies.

Keywords: absolute latitude, seasons, endogenous growth, capital using innovations

JEL Classification: N00, O00, 011, 031, 033

Suggested Citation

Zuleta, Hernando, Seasons, Savings, and GDP (January 31, 2007). Available at SSRN: https://ssrn.com/abstract=901794 or http://dx.doi.org/10.2139/ssrn.901794

Hernando Zuleta (Contact Author)

Universidad del Rosario ( email )

Calle 12 No. 6-25
Bogota, DC
Colombia

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