Abstract: This paper exploits cross-country variation in the degree of geographical isolation, prior to the advent of seafaring and airborne transportation technologies, to examine its impact on the course of economic development across the globe. The empirical investigation establishes that prehistoric geographical isolation has generated a persistent beneficial effect on the process of development and contributed to the contemporary variation in the standard of living across countries. (JEL: O10, F15, N7) (c) 2010 by the European Economic Association.