PROBLEMS OF INTERNATIONAL DATA
PROBLEMS OF INTERNATIONAL DATA
Reasons for Inaccuracies For the most part, incomplete or inaccurate published data result from the inability of many governments to collect the needed details. Poor countries may have such limited resources that other projects necessarily receive priority in the national budget. Why collect precise figures on the literacy rate, governments of poor countries reason, when the same outlay may be used to build schools to improve that rate?
Education affects the competence of governmental officials to maintain and analyze accurate records. Economic factors likewise hamper the retrieval and analysis of records, since hand calculations may be used extensively instead of electronic data-processing systems. The result may be information that is years old before it is made public. Finally, cultural factors affect responses. Mistrust of how the data will be used may lead respondents to give erroneous information—particularly if questions probe financial details.
Of equal concern to the researcher is the publication of information designed to persuade the businessperson to follow a certain course of action. While perhaps not purposefully publishing false statements, many governmental and private organizations may be so selective as to create false impressions. Therefore, it is useful for firms to consider carefully the source of such material in the light of possible motives or biases.
Not all of the inaccuracies, however, are due to the collection and dissemination procedures of governments. A large proportion of the studies by academics that purport to describe business practices either by domestic firms in different countries or by international firms abroad are not necessarily ac-
curate. Broad generalizations are frequently drawn on the basis of too few observations, nonrepresentative samples, and poorly designed questionnaires. There is a tendency for academic researchers to describe the unusual because it may make more interesting reading than the typical.
People's desire and ability to cover up data on themselves may distort published figures substantially. Part of the cover-up is attributable to unrecorded criminal activity. Economic data on Colombia, for example, do not include cocaine revenue, yet it is estimated that the export earnings from cocaine exceed all other Colombian exports combined.1 In the United States, illegal income from such activities as drug trade, bribery, and prostitution amounts to over $100 billion a year. As much as 25 percent of the GNP in Italy and 30 percent in Israel goes unreported because of tax evasion.2 The following illustrates the plight of Argentina:
Last year [1986], only 130,000 out of 3 million people who were supposed to pay the three main taxes actually did. When tax agents hit the streets in search of evaders, they found that 40 percent of the people registered had declared false addresses, including one who claimed to live in the middle of the River Plate, another in a church and a third in a soccer stadium.3
Comparability Problems One important variable when contrasting data from different countries is the year in which collection was made. Censuses, output figures, trade statistics, and base year calculations are published for different periods in different countries; thus it may be necessary for the researcher to make estimates of current figures based on projected growth rates.
There are also numerous definitional differences among countries; for example, a category as seemingly basic as family income might represent quite different things. Not only does the average number of children per family vary across national lines, but such relatives as grandparents, uncles, and cousins also may be included in the definition. In some places literacy is defined by some minimum of formal schooling, in others by certain specified standards, and in still others as simply the ability to read and write one's name. Furthermore, percentages may be published in terms of adult population (with different ages used for adulthood) or total population. Another definitional difference concerns accounting rules such as depreciation, which can substantially alter the comparability of net national product figures among countries. Accounting differences have also led to debates on whether Japan has a higher savings rate than the United States.4
Countries differ in how they measure investment inflows. Some governments record the number of foreign investment projects, some record the value of investments in their own local currency, and still others use value in U.S. dollars or another major international currency. Where value of investments is used, another question is how much of the total value is recorded as "foreign investment." Some governments record the total value of the project, regardless of what portion may be locally owned or financed; some record
the value of foreign capital put in; and some the percentage of the project owned by foreign interests.5
National income and per capita income figures are particularly difficult to compare because of differences in the dispersion of the income. A country with a large middle class will have consumption patterns quite distinct from those in a country where large portions of the population are excluded from the money economy. For instance, in Benin, a West African country, at least half the population effectively earns nothing, which means that the per capita income of the remaining group is at least double what the published figure shows for the country as a whole. Those outside the money economy obviously have consumption patterns that are greater than zero, since they may grow agricultural products and produce other goods, which they consume or barter. The extent to which people in one country produce for their own consumption (e.g., grow vegetables, bake bread, sew clothes, cut hair) will distort comparisons with other countries that follow different patterns.
A further problem concerns exchange rates, which must be used to convert country data to some common currency. A 10 percent appreciation of the Japanese yen in relation to the U.S. dollar will result in a 10 percent increase in per capita income of Japanese residents when figures are reflected in dollars. Does this mean that the Japanese are suddenly 10 percent richer? Obviously not, since their yen income, which they use for about 85 percent of their purchases in the Japanese economy, is unchanged and buys no more. Even without the changes in exchange rates, it is difficult to compare purchasing power, and living standards, since costs are so affected by climate and habit. Exchange rates constitute a very imperfect means of comparing national data.6
Reasons for Inaccuracies For the most part, incomplete or inaccurate published data result from the inability of many governments to collect the needed details. Poor countries may have such limited resources that other projects necessarily receive priority in the national budget. Why collect precise figures on the literacy rate, governments of poor countries reason, when the same outlay may be used to build schools to improve that rate?
Education affects the competence of governmental officials to maintain and analyze accurate records. Economic factors likewise hamper the retrieval and analysis of records, since hand calculations may be used extensively instead of electronic data-processing systems. The result may be information that is years old before it is made public. Finally, cultural factors affect responses. Mistrust of how the data will be used may lead respondents to give erroneous information—particularly if questions probe financial details.
Of equal concern to the researcher is the publication of information designed to persuade the businessperson to follow a certain course of action. While perhaps not purposefully publishing false statements, many governmental and private organizations may be so selective as to create false impressions. Therefore, it is useful for firms to consider carefully the source of such material in the light of possible motives or biases.
Not all of the inaccuracies, however, are due to the collection and dissemination procedures of governments. A large proportion of the studies by academics that purport to describe business practices either by domestic firms in different countries or by international firms abroad are not necessarily ac-
curate. Broad generalizations are frequently drawn on the basis of too few observations, nonrepresentative samples, and poorly designed questionnaires. There is a tendency for academic researchers to describe the unusual because it may make more interesting reading than the typical.
People's desire and ability to cover up data on themselves may distort published figures substantially. Part of the cover-up is attributable to unrecorded criminal activity. Economic data on Colombia, for example, do not include cocaine revenue, yet it is estimated that the export earnings from cocaine exceed all other Colombian exports combined.1 In the United States, illegal income from such activities as drug trade, bribery, and prostitution amounts to over $100 billion a year. As much as 25 percent of the GNP in Italy and 30 percent in Israel goes unreported because of tax evasion.2 The following illustrates the plight of Argentina:
Last year [1986], only 130,000 out of 3 million people who were supposed to pay the three main taxes actually did. When tax agents hit the streets in search of evaders, they found that 40 percent of the people registered had declared false addresses, including one who claimed to live in the middle of the River Plate, another in a church and a third in a soccer stadium.3
Comparability Problems One important variable when contrasting data from different countries is the year in which collection was made. Censuses, output figures, trade statistics, and base year calculations are published for different periods in different countries; thus it may be necessary for the researcher to make estimates of current figures based on projected growth rates.
There are also numerous definitional differences among countries; for example, a category as seemingly basic as family income might represent quite different things. Not only does the average number of children per family vary across national lines, but such relatives as grandparents, uncles, and cousins also may be included in the definition. In some places literacy is defined by some minimum of formal schooling, in others by certain specified standards, and in still others as simply the ability to read and write one's name. Furthermore, percentages may be published in terms of adult population (with different ages used for adulthood) or total population. Another definitional difference concerns accounting rules such as depreciation, which can substantially alter the comparability of net national product figures among countries. Accounting differences have also led to debates on whether Japan has a higher savings rate than the United States.4
Countries differ in how they measure investment inflows. Some governments record the number of foreign investment projects, some record the value of investments in their own local currency, and still others use value in U.S. dollars or another major international currency. Where value of investments is used, another question is how much of the total value is recorded as "foreign investment." Some governments record the total value of the project, regardless of what portion may be locally owned or financed; some record
the value of foreign capital put in; and some the percentage of the project owned by foreign interests.5
National income and per capita income figures are particularly difficult to compare because of differences in the dispersion of the income. A country with a large middle class will have consumption patterns quite distinct from those in a country where large portions of the population are excluded from the money economy. For instance, in Benin, a West African country, at least half the population effectively earns nothing, which means that the per capita income of the remaining group is at least double what the published figure shows for the country as a whole. Those outside the money economy obviously have consumption patterns that are greater than zero, since they may grow agricultural products and produce other goods, which they consume or barter. The extent to which people in one country produce for their own consumption (e.g., grow vegetables, bake bread, sew clothes, cut hair) will distort comparisons with other countries that follow different patterns.
A further problem concerns exchange rates, which must be used to convert country data to some common currency. A 10 percent appreciation of the Japanese yen in relation to the U.S. dollar will result in a 10 percent increase in per capita income of Japanese residents when figures are reflected in dollars. Does this mean that the Japanese are suddenly 10 percent richer? Obviously not, since their yen income, which they use for about 85 percent of their purchases in the Japanese economy, is unchanged and buys no more. Even without the changes in exchange rates, it is difficult to compare purchasing power, and living standards, since costs are so affected by climate and habit. Exchange rates constitute a very imperfect means of comparing national data.6
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