Economics and International Affairs Blog

Sunday, September 13, 2015

Inequality and Economic Performance in Advanced Economies

Interesting findings from a recent OECD study (as reported in WSJ):

http://www.wsj.com/articles/oecd-sees-continued-rise-in-growth-harming-inequality-1432198801

““In recent decades, as much as 40% of the population at the lower end of the distribution has benefited little from economic growth in many countries,” the OECD said. “In some cases, low earners have even seen their incomes fall in real terms. When such a large group in the population gains so little from economic growth, the social fabric frays and trust in institutions is weakened. …

The OECD said the rise in inequality in the decades running up to the 2008 financial crisis has continued in its wake. While in the 1980s the top 10% of earners had incomes that were seven times as large as those of the bottom 10%, that ratio had risen to 9.6 across the OECD’s 34 members by 2013. In The U.S., that ratio rose from 15.1 in 2007 to 18.8 in 2014, a level of inequality only surpassed by Mexico.”

Singapore - An Island of Stability

Singaporeans Choose to Maintain Status Quo

http://www.wsj.com/articles/why-singapore-is-a-safe-harbor-in-asias-economic-tempest-1442144121

“In the five decades since the PAP took over what was a backwater trading port, Singapore’s GDP has grown nearly 40-fold and its 5.5 million people have become richer, per capita, than Americans. Much of the development was overseen by Mr. Lee’s father and Singapore’s first post-independence prime minister, Lee Kuan Yew, who died in March.”

College Grad Earnings – Data Reveals Significant Variations

An interesting piece –

http://www.nytimes.com/2015/09/14/upshot/gaps-in-alumni-earnings-stand-out-in-release-of-college-data.html

A potential solution:

Differential pricing – liberal arts degrees should cost a lot less than technical degrees

Related piece from Vox:

http://www.vox.com/2015/9/12/9314695/college-scorecard-earnings

The article notes:

“Nobody expects every college to make graduates rich. Almost always, the colleges with the highest earning graduates focus on specific fields, such as medicine or engineering. The gender wage gap means that colleges enrolling more women nearly always end up looking worse than colleges with a lot of men. And colleges whose students go into less lucrative work, including teaching and public service, worry that judging colleges based solely on their graduates' median income will overlook their other benefits to society.

But it's not unreasonable to expect students who pursued additional education after high school to earn more than students who did not. Aside from beauty schools, there are more than 400 colleges where, 10 years after they first enrolled, most students still weren't earning $25,000 per year. Most are two-year colleges, many of them for-profit.”

Saturday, September 12, 2015

Tech Stars

The young guns behind Confluent

http://forbesindia.com/article/cross-border/confluents-whiz-kids-rulers-of-the-stream/41059/1

Tesla’s Secret Formula

http://forbesindia.com/article/cross-border/teslas-secret-formula/41057/0

Startups Shaking up the International Remittance Market

http://forbesindia.com/article/ckgsb/online-money-transfers-and-the-skype-of-money/40999/1

Root Causes of the Migration Crisis

Walter Russell Mead on the Causes of the Migration Crisis

http://www.wsj.com/articles/the-roots-of-the-migration-crisis-1441995372

Mead notes:

“One hundred years after the fall of the Ottoman Empire and 50 years after the French left Algeria, the Middle East has failed to build economies that allow ordinary people to live with dignity, has failed to build modern political institutions and has failed to carve out the place of honor and respect in world affairs that its peoples seek….

But it is worth noting that the Arab world has tried a succession of ideologies and forms of government, and that none of them has worked. The liberal nationalism of the early 20th century failed, and so did the socialist nationalism of Egypt’s Gamal Abdel Nasser and his contemporaries. Authoritarianism failed the Arabs too: Compare what Lee Kwan Yew created in resource-free Singapore with the legacy of the Assads in Syria or of Saddam Hussein in Iraq.”

East Asia vs. Middle East – Different Economic Development Models

http://www.washingtonpost.com/blogs/monkey-cage/wp/2015/08/11/a-tale-of-two-economic-trajectories/

The Middle East - Past and Present

http://www.bbc.com/news/world-middle-east-25299553

Friday, September 11, 2015

Economic Development – History, Geography, Institutions and Path Dependence

First, a reality check on the role of institutions in economic development -

Cambridge University economist Ha-Joon Chang’s elegant piece (THE REAL LESSON FOR DEVELOPING COUNTRIES FROM THE HISTORY OF THE DEVELOPED WORLD: 'FREEDOM TO CHOOSE') should be a must read for anyone interested in history or economic development

http://www.historyandpolicy.org/policy-papers/papers/the-real-lesson-for-developing-countries-from-the-history-of-the-developed

Chang notes –

“Contrary to what is assumed by today's orthodoxy, most of the institutions that are regarded as pre-requisites for economic development emerged after, and not before, a significant degree of economic development in the now-developed countries.

… in 1913, the US was at a level of economic development similar to that of Mexico today, but its level of institutional sophistication was well behind that which we see in Mexico now. Women were still formally disenfranchised and blacks and other ethnic minorities were de facto disenfranchised in many parts of the country. It had been just over a decade since a federal bankruptcy law was legislated (1898) and it had been barely two decades since the country recognised foreigners' copyrights (1891). A (highly incomplete) central banking system and income tax had literally only just come into being (1913), and the establishment of a meaningful competition law (the Clayton Act) had to wait another year (1914). Also, there was no federal regulation on securities trading or on child labour, with what little state-level legislation that existed in these areas being of low quality and very poorly enforced.”

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A Reading List –

Paths of Institutional Development: A View from Economic History by Karla Hoff

http ://documents.worldbank.org/curated/en/2003/01/17547888/paths-institutional-development-view-economic-history

Institutions, Factor Endowments, and Paths of Development in the New World by Kenneth L. Sokoloff and Stanley L. Engerman

http://www.econ.nyu.edu/user/debraj/Courses/Readings/SokoloffEngerman.pdf

Why is Africa Poor? by Acemoglu and Robinson

http://economics.mit.edu/files/7641

Institutions Matter, but Not for Everything by Jeffrey Sachs

https://www.imf.org/external/pubs/ft/fandd/2003/06/pdf/sachs.pdf

Government, Geography, and Growth: The True Drivers of Economic Development by Jeffrey Sachs

http://jeffsachs.org/wp-content/uploads/2012/08/Why-Nations-Fail_Sachs-Review.pdf

http://jeffsachs.org/2012/12/reply-to-acemoglu-and-robinsons-response-to-my-book-review/

Which Came First–Democracy or Growth? by Rubén Hernández-Murillo and Christopher J. Martinek

https://www.stlouisfed.org/publications/regional-economist/april-2008/which-came-firstdemocracy-or-growth

Institutions Matter? By Adam Przeworski

http://politics.as.nyu.edu/docs/IO/2800/go_2004.pdf

The Last Instance: Are Institutions the Primary Cause of Economic Development? By Adam Przeworski

http://politics.as.nyu.edu/docs/IO/2800/archives_2004.pdf

Geography vs. Institutions Revisisted: Were Fortunes Reversed? By Adam Przeworski

http://politics.as.nyu.edu/docs/IO/2800/reversal.pdf

Evaluating Recipes for Development Success by Avinash Dixit

http://documents.worldbank.org/curated/en/2007/01/10334079/world-bank-research-observer-22-2

Do Institutions Cause Growth? By Glaeser, Edward L, Rafael LaPorta, Florencio López-de-Silanes, and Andrei Shleifer. 2004.

http://scholar.harvard.edu/shleifer/publications/do-institutions-cause-growth

Institutions and Economic Development: Theory, Policy and History by Ha-Joon Chang

http://journals.cambridge.org/abstract_S1744137410000378

Institutions versus Policies: A Tale of Two Islands by Peter Blair Henry and Conrad Miller

https://archive.nyu.edu/bitstream/2451/31605/2/pbh%20-%20institutions%20vs.%20policies.pdf

Why Has the Grass Been Greener on One Side of Hispaniola? A Comparative Growth Analysis of the Dominican Republic and Haiti by LAURA JARAMILLO and CEMILE SANCAK

http://www.palgrave-journals.com/imfsp/journal/v56/n2/pdf/imfsp200840a.pdf