Income per Natural: Measuring Development as if People Mattered More than Places

47 Pages Posted: 18 Mar 2008

See all articles by Michael A. Clemens

Michael A. Clemens

Center for Global Development; IZA-Institute for the Study of Labor

Lant Pritchett

Harvard University - Harvard Kennedy School (HKS); Center for Global Development

Date Written: March 13, 2008

Abstract

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. We create a first estimate 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% higher than GDP per resident. For 1.1 billion people the difference exceeds 10%. We also show that poverty estimates are very different for national residents and naturals; for example, 26 percent of Haitian naturals who are not poor by the two-dollar-a-day standard live in the United States. These estimates are simply descriptive statistics and do not depend on any assumptions about how much of observed income differences across naturals is selection and how much is a pure location effect. Our conservative, if rough, estimate is that three quarters of this difference represents the effect of international migration on income per natural. This means that departing one's country of birth is today 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.

Keywords: economic development, migration

JEL Classification: F22, O15

Suggested Citation

Clemens, Michael Andrew and Pritchett, Lant, Income per Natural: Measuring Development as if People Mattered More than Places (March 13, 2008). Center for Global Development Working Paper No. 142, Available at SSRN: https://ssrn.com/abstract=1106190 or http://dx.doi.org/10.2139/ssrn.1106190

Michael Andrew Clemens (Contact Author)

Center for Global Development ( email )

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IZA-Institute for the Study of Labor ( email )

HOME PAGE: http://www.iza.org/profile?key=4270

Lant Pritchett

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-4562 (Phone)
617-496-2554 (Fax)

HOME PAGE: http://ksghome.harvard.edu/~lpritch/

Center for Global Development

2055 L St. NW
5th floor
Washington, DC 20036
United States

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