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Correlation relationship between LPI index and GDP per capita for 2013

Jackson Ilya
Master student, German-Kazakh University
20.11.2016
Almaty, Kazakhstan
ij1993@mail.ru

Abstract. This research aims to approve the hypothesis of a statistical


correlation between LPI index and GDP per capita for 2013. LPI - Logistics
Performance Index is a global ranking of countries by international and national
indicators of logistics efficiency. Index is counted and published by the World
Bank every 2 years in order to identify key challenges and opportunities for the
improvement of logistics, and international trade in developing and developed
countries. This research is based on official reports of World Bank for 2013.

Keywords: LPI, Logistics performance index, statistical correlation, ,


statistical analysis, Spearmans coefficient.

The confirmation of the hypothesis of a statistical correlation between LPI


index and GDP per capita for 2013.
LPI - Logistics Performance Index is a global ranking of countries by
international and national indicators of logistics efficiency. Index is counted and
published by the World Bank every 2 years in order to identify key challenges and
opportunities for the improvement of logistics, and international trade in
developing and developed countries.
This research is based on official reports of World Bank for 2013.
Adjusted for the need for analysis of qualitative parameters, as well as data
heteroscedasticity, it is decided to use the Spearman's rank correlation test.

2
=16 ;
3

Where: P - rank correlation coefficient, 2 is the sum of the squares of the


difference between the ranks, n is the size of the sample [2].
Size of the sample n accounts for 160 countries. The sum of the squares of
the difference between the ranks is 165764.
165764
=16 ;
1603 160

Based on these values, the Spearman rank correlation coefficient is P =


0.757. In accordance with the value of the coefficient, correlation power can be
interpreted as high as the value is in the gap between 0.7 - 0.9 [3]. In order to
reinforce the hypothesis, Kendall rank correlation coefficient can also be
calculated:
() ()
=
( 1)
2

Where: P (p) is the number of statistical coincidences, P (q) is the number of


statistical inversions and n is sample size [3].
7164
=
12720
The correlation coefficient has a value equal to = 0.563, which confirms
the hypothesis about the significance of correlation. It is important to emphasize
that Kendall rank correlation coefficient takes a smaller value than the Spearman
coefficient, but this phenomenon is common for statistical researches due to
specificity of coefficients.

Graphical display of the correlation


180
160
140
120
100
LPI

80
60
40
20
0
0 20 40 60 80 100 120 140 160 180
GDP per capita

Fig. 1 Graphical display of the correlation.

As you can see on the chart, the countries occupying a high position in LPI
ranking demonstrate a closer congestion, than countries with low LPI. Based on
that, we can conclude that logistics plays tremendous role in of national welfare
increase. Furthermore, efficient economy cannot be built without developed and
organized logistics and vice versa
The results for some groups of countries are represented below.

Position in
Leaderboard GDP per Value of
Position in Index GDP per
of capita rank
LPI value capita
LPI (USD) deviation
ranking

Germany 1 4.12 47,822 16 15


The
Netherlands 2 4.05 52,172 11 9
Belgium 3 4.04 47,353 17 14
Great Britain 4 4.01 46,332 18 14
Singapore 5 4 56,285 8 3
Sweden 6 3.96 58,939 7 1
Norway 7 3.96 97,307 2 5
Luxembourg
8 3.95 116,664 1 7
USA 9 3.92 54,629 9 0
Japan 10 3.91 36,194 26 16

Table 1. Results of research for the leaderboard of LPI ranking

Table 1 represents the results of the research for countries with the logistics
of the highest performance according to the World Bank. First of all, we should
pay attention on the low rate of deviation (the difference between the provisions in
the two rankings). The average deviation rate for these countries is 8.4 rating
points, or 5.25%. It indicates an extremely close relationship between the index for
this group of countries.

Position in
Countries of GDP per Value of
Position in Index GDP per
Eurasian capita rank
LPI value capita
economic union (USD) deviation
ranking

Kazakhstan 88 2.7 12,602 54 34


Russia 90 2.69 12,736 53 37
Armenia 92 2.67 3,874 98 6
Byelorussia 99 2.64 8,040 68 31
Kirgizstan 149 2.21 1,269 130 19

Table 2. Results of research for the Countries of Eurasian economic union


Analyzing the situation of the countries of the Eurasian Economic Union, it
is important to note the leading position of Kazakhstan's logistics among this
group, despite the low value of the coefficient in general. It is also worth
mentioning that the magnitude of the deviation for the countries of the Eurasian
Economic Union is 25.4 points or 15.9%, which is significantly higher than the
value of the leaders of the rating. This means that indexes are related less closely.

Position in
GDP per Value of
BRICS Position in GDP per
Index value capita rank
Countries LPI capita
(USD) deviation
ranking

Brazil 65 2.94 11,384 57 8


Russia 90 2.69 12,736 53 37
India 54 3.08 1,582 123 69
China 28 3.53 7,590 73 45
South
Africa 34 3.43 13,046 52 18

Table 3. Results of research for BRICS Countries


BRICS countries are also important to the analysis because this group of
countries is characterized by high dynamics of economic growth, as well as a
significant role in international politics and economics. First of all, it is striking
that the group is very heterogeneous by the position in the rankings and the
deviation value. The average value of the deviation makes up 35.5 points, or
22.1%. Mainly, it is based on the lack of significant correlation between indicators
of such countries as China and India.
Summing up, it is important to note that the correlation does not imply a
causal relationship. Most likely, logistics performance and the value of GDP per
capita have common fundamental root causes related to the well-being of the
country, its history, geography, science, technological development, etc. However,
the results of this research approve validity of LPI index, which values do not
contradict with the obvious relationship of logistics performance and GDP per
capita of the country.

References:
1. Connecting to compety 2014. Trade and logistics in the global economy / 2014
The International Bank for Reconstruction and Development / The World
Bank
2. Chernova TV Economic statistics: Textbook. Taganrog: TSURE, 1999. 140 p.
3. AI Orlov Econometrics. Textbook. M .: Publisher "Exam", 2002. 576 p.