Category Archives: Development by the numbers

Things Are Getting Better… AND Worse!

Something crazy happened today: for the first time – perhaps ever – I did research not for a grade, or to impress a teacher, but for the benefit of myself and this blog! This is kind of a big milestone for me, and as you can see from previous posts, it’s been several months coming. I’m really hoping I keep this momentum and enthusiasm rolling, or at least am able to look back on this and recognize that work is most satisfying when it’s done for myself. Anyway, enough about me and my struggles – this blog is about bigger things.

This post will begin a series of posts summarizing my research on developing economies. Basically what I’m doing is using a comparative, quantitative approach to see how livelihoods are changing around the world over time.

The cool thing about macroeconomics is that with just a few easy numbers, you can get a good snapshot of what is going on within a given country. The measures I use most frequently to analyze development are: GDP per capita, and the Gini coefficient. If you’re not familiar with these metrics, go ahead and click on them to read about them on wikipedia.

Basically, GDP per capita measures the average income or wealth of a given country. It takes the Gross Domestic Product (or total national income) and divides it by the total population of a country. If the GDP per capita of the USA is 40,000 dollars, then that’s how much everyone in the country would earn if we all got paid the same amount for our jobs. This of course isn’t realistic, but it gives us a good idea of the “average” income and standard of living. To factor in the differences in income, we can use the Gini coefficient. The Gini coefficient is a number from 0 to 100 that represents everything from perfect income equality to perfect inequality. In the above example of everyone earning the same in the US, the Gini would be 0. If a country had a gini of 100, then one person would control all the income and wealth (think rich estate owner and his impoverished slaves).

So, what do the GDP per capita and Gini coefficients look like? How are they changing over time? I’m currently starting to compile a database, which I hope to eventually use to map and chart development of every country. The basis for this database comes from an old paper I did in college, a little over two years ago in my introductory Econometrics class. Anyway, I decided to compare that data – which included GDP/capita and Gini coefficients for 33 countries – with current data, to see how things were progressing in those countries. The countries were taken from every continent to form a cross-section of the world.

The results are in. Of the 33 countries sampled:

  • Most desirable outcome: 16 countries, or roughly half, saw an increase in both income AND equality. That means a growing share of people are seeing real wage growth! The upper class probably saw the most benefit, but the middle and lower class were also likely made better off in these places. This makes me happy.
  • Desirable outcome: 22 countries, or about 2/3, at least saw an increase in income.
  • Undesirable outcome: 9 countries, or only 1/4, actually saw their real income fall.
  • Least desirable outcome: And last: only 5 countries, or only 15% of the sample, saw a decrease in income AND a rise in income inequality.

These results kind of surprised me. In general, things are getting better! A lot of countries–16–are not only getting richer, but making sure that the riches are more evenly distributed. Most of the countries in this category were modern, developed economies in places where capitalism and democracy have been long-established.

On the other hand, for some 5 countries of the sample, things are clearly getting worse. Most of the countries that saw falling income and rising inequality were nations that are already pretty troubled, such as in Africa and Southeast Asia. Floundering economic growth, and rises in the cost of food and energy are likely increasing poverty for a large portion of the populations of these countries.

I’ll get to posting more specific data–including eventually my databases–at some point. Until then, thanks for reading. I’d love to hear your thoughts on how things are perhaps getting better AND worse, either in the outside world or in your local community. Feel free to drop a comment.

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