We’ve all seen that picture of the two Koreas at night; the North a black-hole, the South a supernova highlighting the economic disparity between the two?
It follows then that nighttime observations of countries should provide a reliable check on reported GDP and that’s what Yingyao Hu and Jiaxiong Yao decided to try and do in a Working Paper from the IMF highlighted this week. Turns out, it only part-reliably helps.
Here’s the problem highlighted with an illustration from the paper.
For China the picture is what you’d expect; but does it tell us anything we didn’t already know? For the U.S. the near unchanged picture fails to reflect progress driven by the New Economy, and for Africa it suggests zero progress; but this is at odds with significant progress.
With the closest one gets to academic candor the researchers note the relationship between nighttime lights and economic progress is ‘non linear’ (in plain English, there isn’t an obvious one).
They progress their work though with some fancy math to try and bang this inconvenient truth square-peg into the round-hole of reasonable expectation with only limited success. The analysis is of some help it seems in areas, such as conflict zones, where data is especially hard to come by; but for those hoping (I was) for some big ‘Ah-hah!s’ from this work there really aren’t any.
So, next time you see pontification based on this sort of analysis be sure to treat it with a very big pinch of salt. The paper isn’t completely without its moments. Like? This really cool map of the world at night from 2010. Find Africa and Australia if you can?
You can access the paper in full via the following link Illuminating Economic Growth.
Happy Sunday.