By Krysten Crawford
The numbers are staggering.
For the first time ever, researchers track 825 million individuals in India to show how paved rural roads help drive economic growth in low-income countries.
Global sales data from 2,650 pharmaceutical companies provide support for a longstanding economic theory that links high demand for products sold in a home country with robust sales of the same products abroad.
Confidential government statistics on Brazil’s largest banks help demonstrate how a boom in soybean production leads to more bank loans in other sectors of the Brazilian economy.
All three studies — presented at a two-day conference on firms, trade and development hosted by the Stanford Center for International Development (SCID) and the U.K.-based International Growth Centre (IGC) — offer important insights into a crucial question that SCID and other scholars have long sought to answer: why the economies of developing countries are far less productive than the economies of developed countries.
And the conference itself highlights a backbone of SCID: the center’s Firms and Global Productivity initiative, a research and policy program launched in 2014 that focuses on the role that businesses play in developing economies.
The analyses brought to light at the conference are significant for another reason. They point to the key role that data now play in helping researchers gain a better understanding of the productivity problem in developing economies. Until a few years ago, these studies could not have been done — either because the data underlying them didn’t exist or were kept under wraps.
“The way that we, as researchers, can work with data has just exploded,” says Dave Donaldson, a Stanford associate professor of economics and faculty affiliate at SCID.
It’s nearly impossible to identify an industry or academic discipline that hasn’t been transformed by big data. But the rapid rise of easily accessible data has been especially critical for researchers at SCID.
“The private sector, while a very important part of growth in developing countries, has always been hard to study simply because the data on firms has traditionally been very sparse compared to other types of data sets on, say, households or individuals,” says Donaldson, who helped organize this year’s SCID-IGC 2016 Conference on Trade, Firms and Development. Eighty faculty and graduate students in the field attended the two-day event, held at Stanford.
Eric Verhoogen, an associate professor of economics and international affairs at Columbia University, adds that data ubiquity is also renewing interest in the topic of industrial policy, which looks at programs that promote growth and innovation among manufacturers and other producers.
“Data availability really is changing the game,” says Verhoogen, who delivered a keynote address at the SCID-IGC conference and helped organize the event.
Jessica Leino, SCID’s deputy director, says the cutting-edge research presented at the conference is just one instance of the unique role Stanford plays in bringing together microeconomics and macroeconomics to understand the role of the private sector in economic growth.
Through its Firms and Global Productivity initiative, the center supports research partnerships between Stanford faculty and researchers at other institutions. These collaborations look at management and business practices in developing economies, as well as the impact of trade policy and global value chains on productivity in India, China and other regions of the world.
“SCID has a premier collection of faculty from across disciplines who are working on this nexus of labor, industrial organization and trade,” says Leino. “People were excited to be part of a conference that highlights the intersection of these three fields in ways that aren’t replicated anywhere else.”
It’s well known among scholars and policymakers that economies with high levels of productivity tend to enjoy higher living standards. But the exact reasons why productivity often lags in developing countries relative to more advanced economies — and, more importantly, how policies can help close that gap — remain a mystery.
At SCID, finding answers is core to the center’s mission.
“We’re bringing together theory and empirical work in new and exciting ways,” says Leino.
The catalyst: data.
Krysten Crawford is a freelance writer.