He starts with the striking observation that the relationship between latitude and development (measured here as population density or urbanization rate) has reversed over time. In year 2000, the further a country is from the equator, the richer it is; but in year 1500, it was the opposite: Mediterranean countries were wealthier than their northerly neighbors.
To explain this change, Dalgaard and Strulik use the Bergmann's Rule. In Vollrath's words:
Bergmann’s rule states that average body mass of organisms rises as they get farther from the equator. This holds for people as well as animals. People generally have higher body mass farther from the equator.Bergmann's rule is due to biological reasons. Having a small surface area-to-mass ratio is good in cold climates, because it means you lose less body heat. So in high latitudes it's good to have large bodies (small body surface relative to weight), while near the equator it's the opposite.
Big bodies also need a lot of calories, and pregnant women need even more calories. Given a supply of food, women in higher latitudes were forced to have fewer babies, so populations were smaller. (All this is prior to the Industrial Revolution.) So in Southern Europe populations were larger, which also meant, "in almost any type of growth model you write down," more innovation. More innovation, voilà, means wealthier people.
Eventually, the argument goes, the northern countries catch up on innovation, to the point where it makes sense to invest more on human capital. They were already having few children, so investing more in education, etc., per kid, comes naturally. Average human capital is higher, they become more adept at using human capital-intensive technology, and they become wealthier than the southern countries (vice versa in the southern hemisphere). The loop between development, fertility, and human capital investment reinforces itself, and the high latitude countries start the demographic transition earlier than their tropical counterparts.
I don't know enough about biology--or development economics--to add much here. My prior is that cultural reasons exert great influence on fertility, creating demographic inertia, and working against the type of "structural change" that inverts the relationship between latitude and development. And how about government policy? France has a significantly higher fertility rate than Spain or Italy.