US Inequality in 6 charts

From the New Yorker.
Hat tip: DC

Last chance...

What were your favorite/least favorite topics of the course?
What topic do you think is the most pressing in terms of where policy makers should address their attention?
What are some interesting research questions related to growth and development that you'd like to learn more about?

Dutch disease in Nigeria

Here is an excellent synopsis of the situation in Nigeria, straight from the ground level.

If a picture is worth a thousand words, this documentary (Poison Fire) is worth a few million. It's 30 minutes long, but well worth it.

Inequality, trickle-down consumption and economic growth

Here is an interesting article at the Washington Post (similar story in the local paper), regarding the effect of inequality on household savings by the middle class. The basic idea is one that we've discussed in class - personal well being may be influenced by the well being of those around you. If your "neighbors" are getting richer and buying more stuff, you may feel poorer and spend more to "catch up". What are some of the macro and micro implications? I can tell you from personal experience that this phenomenon works in reverse too. When we lived abroad, we lived very simply, barely spending any money at all.  There's a lesson here: As your income increases over time, try to maintain at least some of the spending habits that you develop when you have lower income.
Note chart 4 in the article... this looks like a simplified way of reporting the results of a regression model.

Health and economic growth

Our next topic is health...

Here is a nice intro from Jeffrey Sachs (Prof at Columbia).  Here is the full Sach's Report.

Here is a video of Sachs providing an overview 10 years later. 

Here is a nice overview of the relationship(s) between health and economic growth from The World Bank. It is long, but well worth the read.

For those of you interested in reading a more detailed analysis of the relationship between health and economic growth, here is a good paper from NBER. In both of these latter papers, note the discussion of the endogeneity problem we've been talking about all semester, and the econometric solution of instrumental variables.

Stiglitz on inequality (and other stuff)

We can't talk about inequality without talking about Joseph Stiglitz.


Here is an interview at Rolling Stone. 

Here is a book review at the NYT

Here is a long article with lots of good economics at Vanity Fair

China moves to narrow inequality

Read about it here at the NYT.
Note the discussion of corruption and income reporting as well as the move to increase spending on health, education and social welfare programs.  This article is interesting in terms of creating a natural experiment that economists can study as time goes by. It also highlights the importance of the source of inequality... we can expect rapid economic growth to cause increased inequality, but here it seems that illegal skimming of income by those in power is also to blame.

Baby bust?

Here is an interesting piece from Jonathan Last at the WSJ. He discusses the problems that may be associated with declining fertility rates in the U.S.  We're going to talk about the relationship between population and economic growth and development in class later in the semester, and this article provides some interesting previews.  The author's premise is that declining fertility rates result in economic problems. He argues that a more sustainable level of human capital (e.g. fertility near the "replacement rate") will make these problems more manageable. The article is a mix of facts, empirical evidence, opinion and conjecture, so be sure to think carefully about what you're reading.

For the purposes of our course, I hope it's clear that causality flows in both directions here. The result appears to be a negative feedback loop (i.e. an action sets in motion a reaction that at least partially offsets the original action).  So I have to wonder if we're simply oscillating toward an equilibrium, rather than starting a new trend toward steady decline.

Consider...
1. Economic growth may lead to slower population growth.
What evidence do we have in support of this?
What are the reasons here?  J. Last pins "universal" college education as the starting point - but where does that come from?

2. Slower population growth, in turn, may temper economic growth.
Again, consider the reasons for this. Could slow population growth foster economic growth?

3. If 2 is true, should this hit to economic growth then cause a slight uptick in population growth?
...and on, and on until we approach a steady state?

Last uses Japan to illustrate potential problems that arise from slowing fertility rates. He then discusses the importance of immigration in terms of "outsourcing fertility".
Here is a related article at CNN Money. Hatip: CM.

He then goes off on the price of college and then land rents and infrastructure. I'm not sure I follow all of List's logic, but I'd like to hear your thoughts.  Comments are welcome regarding any of these issues, but let's do our best to keep politics and opinion out of it.  As always, data (e.g Gapminder, nationmaster) and links to more reading are encouraged.

extra: Who are Esther Boserups and Julian Simon?

Bill Gates on using measurement and data

Bill Gates writes the most recent entry of the Saturday Essay for the WSJ, concentrating on the importance of measuring outcomes. The approach he describes (set goals, choose a strategy, measure outcomes, tweak the strategy) might be described as "adaptive management". Note his positive view of progress toward the MDGs.  I think he'd like econometrics.

HDI Links

Here is the stuff from Tuesday's class:

HDI by country
http://hdr.undp.org/en/media/HDR_2011_EN_Table1.pdf

HDI map

http://hdr.undp.org/en/data/map/

Build your own HDI

http://hdr.undp.org/en/data/build/

HDI trends over time

http://hdr.undp.org/en/data/trends/

"It's like, Wow!"

Sorry for the silly title. That's a quote from one of the articles below, and I chuckle every time I read it.

A few classes ago I suggested that there are very few things that are either "all good" or "all bad". One of the first and most important lessons from economics is that just about everything in life has tradeoffs. Absolutes are rare. Opportunity costs are ever-present.  Even the most well-intended policies will result in costs imposed on some sectors of society.  Of course, for every rule there is an exception. The education of girls as a means to fight poverty is probably one of the true unequivocal "win-win" prescriptions that we know of. 

Below are some recent stories from the popular press. We'll get into more academic analysis of the issues later in the term.  Can anyone come up with a good gapminder graph to help us take a look at these issues?

Educating women to fight terrorism from the LA Times

Marked decrease in fertility rates in Afghanistan from the Asbury Park Press

Online education, MOOCs and empowerment of women from the LA Times

Reading on PPP exchange rates

Here is some reading on purchasing power parity exchange rates:

The Sauder School of Business at UBC has a nice introduction

IMF has a good synthesis of the pros and cons of PPP exchange rates and official exchange rates, and more here.

Here is an interesting look at PPP from The Economist.

Here is a detailed article from Bank of Canada Review

One thing to note about PPP exchange rates is that they are typically not reported in an easy to use fashion like official exchange rates. Most often, what is reported is a PPP "conversion factor", which is the ratio of the PPP exchange rate to the official exchange rate.

Here is a list of PPP conversion factors from the World Bank.

Let's do an example... Consider the nation of Barbados....
2009 per capita GDP was approximately $27,720 Barbados dollars
The official (fixed) exchange rate is 1USD =  1.98 BD
This implies that per capita GDP is $14,000 USD

But, prices of non-traded goods are different in Barbados than there are here at home, so this may be an inappropriate estimate of average earnings. According to the World Bank, the PPP conversion factor for Barbados is 0.70.

This means PPP xrate/official xrate  = 0.70
or...
PPPxrate/1.98 = 0.70
which implies that the PPPxrate = 1.386 BD to 1 USD (or 1 BD = 0.721 USD)

Hence, the per capita GDP of Barbados in purchasing power terms is really 20,000 USD.

For fun, go to gapminder world and plot GDP per capita against GDP per capita in PPP terms.
Notice that for most countries, PPP GDP > GDP.  Identify a country for which the PPP GDP < GDP.
What does this mean?