Alwyn Young just broke your regression

Alwyn Young — the same guy whose paper carefully accounting for growth in East Asian was popularized by Krugman and sparked an enormous debate — has been circulating a paper on African growth rates. Here’s the 2009 version (PDF) and October 2012 version. The abstract of the latter paper:

Measures of real consumption based upon the ownership of durable goods, the quality of housing, the health and mortality of children, the education of youth and the allocation of female time in the household indicate that sub-Saharan living standards have, for the past two decades, been growing about 3.4 to 3.7 percent per annum, i.e. three and a half to four times the rate indicated in international data sets. (emphasis added)

The Demographic and Health Surveys are large-scale nationally-representative surveys of health, family planning, and related modules that tend to ask the same questions across different countries and over large periods of time. They have major limitations, but in the absence of high-quality data from governments they’re often the best source for national health data. The DHS doesn’t collect much economic data, but they do ask about ownership of certain durable goods (like TVs, toilets, etc), and the answers to these questions are used to construct a wealth index that is very useful for studies of health equity — something I’m taking advantage of in my current work. (As an aside, this excellent report from Measure DHS (PDF) describes the history of the wealth index.)

What Young has done is to take this durable asset data from many DHS surveys and try to estimate a measure of GDP growth from actually-measured data, rather than the (arguably) sketchier methods typically used to get national GDP numbers in many African countries. Not all countries are represented at any given point in time in the body of DHS data, which is why he ends up with a very-unbalanced panel data set for “Africa,” rather than being able to measure growth rates in individual countries. All the data and code for the paper are available here.

Young’s methods themselves are certain to spark ongoing debate (see commentary and links from Tyler Cowen and Chris Blattman), so this is far from settled — and may well never be. The takeaway is probably not that Young’s numbers are right so much as that there’s a lot of data out there that we shouldn’t trust very much, and that transparency about the sources and methodology behind data, official or not, is very helpful. I just wanted to raise one question: if Young’s data is right, just how many published papers are wrong?

There is a huge literature on cross-country growth ‘s empirics. A Google Scholar search for “cross-country growth Africa” turns up 62,400 results. While not all of these papers are using African countries’ GDPs as an outcome, a lot of them are. This literature has many failings which have been duly pointed out by Bill Easterly and many others, to the extent that an up-and-coming economist is likely to steer away from this sort of work for fear of being mocked. Relatedly, in Acemoglu and Robinson’s recent and entertaining take-down of Jeff Sachs, one of their insults criticisms is that Sachs only knows something because he’s been running “kitchen sink growth regressions.”

Young’s paper just adds more fuel to that fire. If African GDP growth has been 3 1/2 to 4 times greater than the official data says, then every single paper that uses the old GDP numbers is now even more suspect.

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