Overstatement of GDP growth in autocracies and the recent decline in global inequality

Abstract

After rising for almost two centuries, global income inequality declined substantially after 2000. While past scholarship on global inequality has explored several causes for this recent decline in inequality, these studies take for granted the official GDP figures released by national governments. A parallel social science literature has documented the manipulation of official data to exaggerate economic performance in autocratic countries, but this work has stopped short of examining the broader implications of this phenomenon. In this study, I explore the overstatement of GDP growth figures in autocracies as another contributor to the recent decline in estimates of global inequality based on officially reported GDP figures. Drawing on satellite-based night-time lights data and an empirical strategy from recent research, I compute model-based estimates of GDP overstatement in autocracies. I then combine this information with data on within-country income inequality to arrive at adjusted estimates of global income inequality in a sample of 109 countries constituting 92 percent of the world’s population. I find that between 1995 and 2014, ~20 percent of the decline in global inequality can be explained by the overstatement of GDP growth in less democratic countries. I conclude by discussing the broader implications of these findings for our understanding of global inequality and its political economy.