Income Per Natural: A Peculiar New Economic Statistic

Michael Clemens and Lant Pritchett, researchers at the Center for Global Development, argue that traditional measure of national income distort or understanding of wealth distribution.

It is easy to learn the average income of a resident of El Salvador or Albania. But there is no systematic source of information on the average income of a Salvadoran or Albanian. In this new working paper, research fellow Michael Clemens and non-resident fellow Lant Pritchett create a new statistic: income per natural — the mean annual income of persons born in a given country, regardless of where that person now resides. If income per capita has any interpretation as a welfare measure, exclusive focus on the nationally resident population can lead to substantial errors of the income of the natural population for countries where emigration is an important path to greater welfare. The estimates differ substantially from traditional measures of GDP or GNI per resident, and not just for a handful of tiny countries. Almost 43 million people live in a group of countries whose income per natural collectively is 50 percent higher than GDP per resident. For 1.1 billion people the difference exceeds 10 percent.

[…]

The bottom line: migration is one of the most important sources of poverty reduction for a large portion of the developing world. If economic development is defined as rising human well being, then a residence-neutral measure of well-being emphasizes that crossing international borders is not an alternative to economic development, it is economic development.

Tyler Cowen and Will Wilkinson are favorably impressed with the “income per natural” concept and I concur that it’s an interesting tool.

I’m less clear, however, as to why it should lead to any great paradigm shifts. The paper’s subtitle, “Measuring Development as if People Mattered More Than Places,” sounds provocative and enlightened since, after all, it is indeed the well-being of people that we’re interested in. At the same time, though, it seems to me that places are worth understanding, too, since borders impact how people live.

A Haitian who escapes the abject poverty and brutal conditions of his country by emigrating to the United States and taking a job as a cab driver has almost certainly improved his lot in life. So, if our intent is to capture the micro-level data of said individual as an economic unit, his move is a plus. But if we’re interested in understanding what life is like for people in Haiti, counting him as “a Haitian” strikes me as distortionary since, after all, he no longer lives in Haiti. If he’s sending money home to his brother, thus raising his brother’s standard of living, existing data capture that fact. Ditto if he “retires” after fifteen or twenty years and moves back to Haiti to either to live a life of relative luxury or to start up a new business. If, on the other hand, he stays in the United States and spends his newfound wealth here, it’s far from clear to me why he shouldn’t count as “an American” for statistical analysis.

FILED UNDER: Economics and Business, General,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Bithead says:

    Mmph.

    I am suspicious that at this early stage of the game,to have such loud blanket approval aof a foundational shift, suggests a re-determined goal in mind for the paper being written in the first place.

    As an example, you say:

    A Haitian who escapes the abject poverty and brutal conditions of his country by emigrating to the United States and taking a job as a cab driver has almost certainly improved his lot in life. So, if our intent is to capture the micro-level data of said individual as an economic unit, his move is a plus.

    I wonder if that kind of powsitive outcome would even get counted, since it seems to relfect well on the oppotunities afforded thsose coming to American. The usual thrust of papers threatening a paradigm shift, is anti-american. A quick and dirty glance at it reveals no such leanings, but we’ve seen it often enough before to at least regard the whole thing with a little caution.

  2. Michael says:

    The usual thrust of papers threatening a paradigm shift, is anti-american.

    Jesus Christ Bit, not everybody is out to get you, and not everything is about America. Some people don’t even give a crap about politics of foreign relations.

    Sometime people write papers because the subject is important, not because of love or hate for America. It is entirely possible that the premise of the paper was “What do economic statistics look like when you group people by place of birth, not current residence”, and not “How can I write an economic paper to make America look like the great Satan”.

    Serious, take a moment and step out side, there’s a whole world out there, and it’s not as scary as you think.

  3. James Joyner says:

    The usual thrust of papers threatening a paradigm shift, is anti-american.

    Actually, as Cowen points out, the USA has the highest “income per natural” in the world.

  4. Richard Gardner says:

    You could also apply this methodology to the “brain drain” States of the USA. If your best and brightest or highly motivated leave because of low opportunities, you can still get credit for them striking it big elsewhere.

  5. Bithead says:

    Actually, as Cowen points out, the USA has the highest “income per natural” in the world.

    Quite so. And what the ‘study’ will reveal is that’s because there not enough ‘redistribution’ going on. That is, if this comes up as so many have before.

    It may not be in this case, of course I don’t know it for sure. But it’s happened so often we can run the arguments by rote.

    Sometime people write papers because the subject is important, not because of love or hate for America. It is entirely possible that the premise of the paper was “What do economic statistics look like when you group people by place of birth, not current residence”, and not “How can I write an economic paper to make America look like the great Satan”.

    And if it comes down as I say, will I hear from you on this? Uh-huh.

    Look; Of COURSE it’s possible. Given the history, however, it seems reasonable to look on such things with at least a little skeptsism.

  6. Michael says:

    And if it comes down as I say, will I hear from you on this? Uh-huh.

    Probably, because you know I hang out here often, and have admitted mistakes in the past. Though, like you, I’m not committing to anything on this particular study, I’m just saying that you had quite a knee-jerk reaction to it given the information at hand.

  7. Bithead says:

    mppff.

    Let’s just say I’ve seen it’s like enough times to program the response.

  8. Michael says:

    Let’s just say I’ve seen it’s like enough times to program the response.

    Which goes back to my theory on racism, that those who have been the subject of it in the past are more likely to perceive it where it doesn’t exist, than those who have not been subject to it.

  9. Bithead says:

    Which goes back to my theory on racism, that those who have been the subject of it in the past are more likely to perceive it where it doesn’t exist, than those who have not been subject to it.

    Ah, but doesn’t that statement assume there’s no fact attached to what I said? History would seem to be against you, here.

  10. Michael says:

    Ah, but doesn’t that statement assume there’s no fact attached to what I said? History would seem to be against you, here.

    Since we don’t currently have access to the facts, your and my perceptions are based purely on our past experience and future expectations, and not at all on the content itself. Once the facts are knows, then your and my opinions of the content will be fact-based.

  11. Bithead says:

    To the contrary, we have a long history on this kind of thing. Granted we don’t ahve the facts in the particular of this one report… but we ahve enough of others of it’s like to draw a reasonable conclusion from them.