Wednesday, November 2, 2011

Geography and Income

From Econbrowser:
Running a little behind, so I decided today to reprint something I wrote 4 years ago as an excuse to call attention to some charts I still think are pretty interesting.

A paper by John Gallup, Jeffrey Sachs and Andrew Mellinger in the International Regional Science Review in 1999 introduced the concept of "GDP density", calculated by multiplying GDP per capita by the number of people per square kilometer. Basically GDP density is a measure of the total amount of economic activity that takes place at different spots on our globe. I found the map they produced quite fascinating:


Not surprisingly, it looks a whole lot like those satellite pictures of the earth at night:

Source: Astronomy Picture of the Day
Economists often try to explain differences in income across countries by factors such as the capital stock, education level, and institutions defining property rights, all of which the government could influence with appropriate policies. But when you look at pictures like these, you can't help but be struck that there appear to be other very important and purely physical determinants of GDP. Economic activity clearly is much more intense near oceans, or, if inland, along navigable rivers where transportation by ship is feasible. Temperate climates with adequate rainfall also seem to be extremely important, perhaps for productivity of agriculture as well as for mitigating disease....MORE
HT: Real Time Economics

Just as impressive, in part because it seems like a parlor trick:
How to Predict a Nation's GDP per Capita at r=.97 Using "Economic Freedom and average citizenry IQ -- plus slight tweaks from trading block membership and oil"