How reliable are economic indicators of development?

What are the disadvantages of GNI?

There are several different ways economic development can be measured. One of the most common is gross national income data or GNI. However, this data can be very misleading in establishing a country’s economic development level. Using the mathematical mean is a crude way of establishing a typical figure. If there is a significant divide between the earnings of rich and poor people, the income of the more wealthy will skew the GNP.

The data does not include the value of how hard people work, as is common in LICs and NEEs, as many people work in subsistence farming or the informal sector.

Other shortcomings in this data are that it may not be accurate, and people may not tell the truth about their earnings; conflict or natural disasters can make it difficult to collect data. Also, large-scale migration makes it difficult to accurately record population and earnings in any one place.

Also, GNI data is expressed in US dollars, the value of which changes daily. Finally, some countries have underestimated their GNI because they did not include earnings from specific sectors. For example, Nigeria did not include revenue from the internet or entertainment in their calculations until recently, leading to the value of its economy being underestimated.

Given the World Bank’s categorisation of LICs, some LICs might be NEEs, or vice versa.