Wednesday, May 16, 2018

A Handy Adjustment Factor For Estimating GDP In Autocracies

Via the Social Science Research Network:

How Much Should We Trust the Dictator's GDP Estimates?
Luis R. MartinezUniversity of Chicago - Irving B. Harris Graduate School of Public Policy Studies
Date Written: May 1, 2018

I study the manipulation of GDP statistics in weak and non-democracies. I show that the elasticity of official GDP figures to nighttime lights is systematically larger in more authoritarian regimes. This autocracy gradient in the night-lights elasticity of GDP cannot be explained by differences in a wide range of factors that may affect the mapping of night lights to GDP, such as economic structure, statistical capacity, rates of urbanization or electrification. The gradient is larger when there is a stronger incentive to exaggerate economic performance (years of low growth, before elections or after becoming ineligible for foreign aid) and is only present for GDP sub-components that rely on government information and have low third-party verification. The results indicate that yearly GDP growth rates are inflated by a factor of between 1.15 and 1.3 in the most authoritarian regimes. Correcting for manipulation substantially changes our understanding of comparative economic performance at the turn of the XXI century. 
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