The relativity of poverty and income: How reliable are African economic statistics?

Abstract

It has been argued that the fundamental cause of Africa’s current relative poverty is a lack of pro-growth institutions deriving either from the colonial system, the period of slavery, or from particular geographic or population characteristics. This article takes a fresh look at estimates of African country incomes. It subjects the available datasets to tests of accuracy, reliability, and volatility, and finds that there is very little to explain in terms of diversity of income between countries. With the exception of some resource-rich enclaves, a few island states, and South Africa, the income of one African economy is not meaningfully different from another. It is found that the majority of African countries should for all practical purposes be considered to have the same income level. The article therefore concludes that it is futile to use GDP estimates to prove a link between income today and existence of pro-growth institutions in the past, and recommends a searching reconsideration of the almost exclusive use of GDP as a measure of relative development.