We admire them. We envy them. And we hate them. Billionaires. People who made billions of dollars. They are everywhere from Hong Kong to Ukraine. Hong Kong has the highest number of billionaires per million of people. Nigeria has the lowest. In Ukraine and Serbia it is the same. But what is a relationship between the cross-country concentration of billionaires and economic development?
A very cool paper "Billionaires" by GMU Professor Peter Leeson and Tino Sanandaji from the University of Chicago and the Research Institute of Industrial Economics (Sweden) answers this very important question. Professor Leeson and Dr. Sanandaji write:
"The results of our empirical analysis are simple but striking. First, self-employed entrepreneurs are associated with poverty, not wealth. In contrast, billionaires are associated with wealth rather than poverty.
Second, the institutions consistent with self-employed entrepreneurs differ markedly from
the ones consistent with billionaires. Where well-protected private property rights and supporting, market-enhancing institutions ‡flourish, so do billionaires. But self-employed entrepreneurs don'’t. Where private property rights are weakly protected and interventionist institutions ‡flourish, so do self-employed entrepreneurs. But billionaires don’'t.
Finally, only the institutions that we find are consistent with billionaires are also consistent with the institutions that underlie economic prosperity. The institutions that we find are consistent with self-employed entrepreneurs are the ones associated with comparative economic poverty."
So what does it mean for Ukraine? Since Ukraine is in the bottom of the list, Ukraine must have more poverty than prosperity. Then Ukraine lacks well-protected private property rights and supporting market-enhancing institutions. Ukraine, however, must have a large number of interventionist institutions. Thus, Ukraine must have more self-employed entrepreneurs than billionaires! Can you disagree with something at all? I can't.
