Saturday, January 19, 2008

The Distribution of World Income

(click map for larger view)

A fascinating map of GDP density around the world:

One of the most profound questions in economics is why are some countries rich and others poor?

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.

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. When you look at just the United States, for example, no one would suggest that the big open stretches in the state of Utah imply that its governor has promoted policies that are hostile to business. Instead, the Utah desert, while one of the most beautiful spots on earth, is an inherently less suitable place for growing food or shipping products in and out. By the same principle, just looking at physical features, you'd predict that Afghanistan-- a landlocked, mountainous desert-- is destined to be poor, no matter what policies they adopt.

Follow the link for much, much more on a truly fascinating topic.

No comments: