What if everything we know about poor countries’ economies is totally wrong?

Friday, July 11, 2014

As China and India continue their fairly rapid paces of economic growth, a greater and greater share of extreme poverty is going to be concentrated in sub-Saharan Africa. But if we’re going to make progress there, we need to have good numbers about how various economies are faring, how income is distributed within them, and so forth.

The trouble, Simon Fraser University economist Morten Jerven argues, is that those numbers are often incomplete at best and downright false at worst. It’s a problem that came into sharp relief recently when Nigeria “rebased” its GDP numbers, doubling its GDP in the process.

Jerven and I spoke on the phone about his book on the topic, Poor Numbers, the extent of the problem, and how to fix it. If you’re interested in learning more, the Center for Global Development’s Amanda Glassman and Alex Ezeh have a great new report on improving data quality. Columbia’s Chris Blattman had a smart post on why it might make sense for African governments to prioritize things other than improved data collection, and Slate’s Josh Keating had a helpful round-up of the debate here.

Dylan Matthews: What are the basic problems with numbers in the countries you study?

Morten Jerven: We often take GDP as a given, objective fact, much as we think about, if you’re listening to the weather report, the meteorologist can measure air pressure, temperature, and the speed of the wind, and use these physical observations. And we tend to move along thinking of inflation, unemployment, and economic growth as objective metrics. But they aren’t.

To arrive at GDP per capita, for example, you have to add up all the goods and services used in one country in any given year and then compare it with last year’s and control for price changes and so forth. That’s complicated enough in a country like the US, but you still have some helpful things. The US government collects taxes, so that means you know income for persons. It also collects corporate taxes, so you know the income of corporations. It collects labor statistics, so it has a lot of information and it’s the task of the statistical bureau to aggregate it.

Source: Vox Media (link opens in a new window)

Base of the Pyramid, employment, governance, poverty alleviation