Thursday, January 31, 2013

HDI Links

Here is the stuff from Tuesday's class:

HDI map

Build your own HDI

HDI trends over time

Friday, January 25, 2013

"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

Thursday, January 17, 2013

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
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?