EH.Net Abstracts in Economic History

      EHS Abstract Submission
                    (c) 1996 EH.Net
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              Name:  Eric Helland
               Email:  ehelland at wp.bsu.edu
         Institution:  Ball State University

        Co-author:  John V. C. Nye, Washington University

           Title:  On the Application of Benford's Law to
International Macroeconomic Statistics

  Internet Address
of abstracted work:  Not available on the Internet

           By mail:
                     Eric Helland
                     Department of Economics
                     Ball State University
                     Muncie IN 47306-0340 USA

          Language:  English

          Abstract:
   In this paper we present a technique for assessing the
"naturalness" of economic data.  This technique, known as
Benford's Law, demonstrates that the first digits of naturally
occurring phenomena do not occur with equal frequency.	In fact,
lower digits occur with greater frequency in tabulated natural
data than larger digits.  If data do not conform to Benford's
Law, then questions arise about the process that generated it.
This test is analogous to standard tests for randomness but, as
Benford's law makes clear, pure randomness may not be the
appropriate criterion.	In this paper we apply Benford's Law to
one of the most commonly used data sets in economics:
international macroeconomic statistics.  There are two possible
reasons why violations to Benford's Law might occur: 1) the
violation is the result of purposeful tampering; or 2) the
violation is a reflection of some non-naturalness in the number
being measured.  We find that the World Bank data conform well to
Benford's Law.	By contrast, the Penn World tables and the
European Historical Statistics fail Benford's naturalness test.
While our test cannot provide definitive judgments on the reason
why some macro statistics fail to conform to Benford's Law, the
finding that certain macroeconomic data sets are in some way
non-natural suggests that further inquiry into the integrity of
this data is necessary.


      Bibliography:  Helland, Eric and John V.C. Nye. "On the
Application of Benford's Law to International Macroeconomic
Statistics." Paper prepared for presentation at the ASSA
meetings/Cliometrics Sessions, January 1997, New Orleans.

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