Author Archives: jdingel

Where does Dambisa Moyo get her poverty rate data?

Columbia’s John McArthur says that Dambisa Moyo has claimed that “in the 1970s 10 percent of the population [in Africa] was living in dire poverty. That number is now over 70 percent.” She’s been quoted by Bloomberg as saying that Africa’s “poverty rate doubled between 1981 and 2002.” Niall Ferguson’s foreword to her book says “between 1970 and 1998, when aid flows to Africa were at their peak, the poverty rate in Africa actually rose from 11 per cent to a staggering 66 per cent.” (One review subsequently misquoted this as 1970-78.)

World Bank numbers (from Shaohua Chen and Martin Ravallion) say the African poverty rate was 50% in both 1981 and 2005 (the rate rose during the 1980s and fell in more recent years). That contrasts starkly with the Bloomberg quotation.

I’m having trouble finding any estimates of the poverty rate prior to 1981. Please leave suggestions in the comments. But if Africa’s poverty rate jumped from 10% to 50% during the 1970s, that would be a story worth a book of its own.

Counting the poor is not an easy task, but at first glance, something appears seriously wrong with Moyo’s poverty statistics.

The WTO as an institutional backstop against protectionism

What’s keeping protectionism in check? Chris Giles and Alan Beattie in the FT:

Leaders of the Group of 20 nations will on Thursday pledge to promote trade as a crucial driver of economic growth, to avoid protectionist measures and to strive for a rapid completion of the Doha round of trade negotiations.

But behind these fine intentions lies the debris of similarly grand past promises and a record of creeping protectionism since the start of the year…

the WTO itself, along with independent trade experts, says that the rise in protectionist actions over the past few months has not been particularly dramatic, largely involving the reversal of cuts in tariffs taken during the commodity price boom of 2007-8.

But it appears to be the existence of binding legal agreements, either under the WTO or bilateral or regional pacts, that have constrained governments, rather than the G20 pledge…

In an attempt to hold governments to their no protectionism pledge, the WTO has begun publishing a document, previously compiled for internal use, which lists actions taken both to loosen and tighten restrictions on trade.

The publication has been controversial within the WTO. Korea and Ecuador both asked for changes to be made after the first version was circulated in January, saying it did not accurately reflect their trade policy.

“I will go further in the direction of name and shame, but I have to go carefully,” Mr Lamy says. “We have to raise the temperature bit by bit.”

Congressional representatives who don't understand international economics

Congresswoman Michelle Bachmann is clueless about the dollar’s role as the world’s reserve currency. In fact, it seems she’s clueless about what a reserve currency is. That’s why, in reaction to China’s SDR proposal, she’s introducing legislation to “bar the dollar from being replaced by any foreign currency.” And apparently a lot of people are similarly confused and need a quick explanation of the difference between legal tender and currency reserves.

If Rep. Bachmann’s office needs some assistance with international economics, I’d be happy to provide some advice over the phone at a reasonable price.

Last-minute advice for the G20 summit?

I’m seeing a flurry of last-minute publications telling the G20 leaders what they should do on Thursday. Isn’t publishing a new report just five days before the summit a little late to shape the agenda? Presumably bureaucrats do a lot of background work,  and the real achievements are made during the preparation for the summit rather than the single day itself.

The ridiculous inefficiency of migration barriers

Michael Clemens, Claudio E. Montenegro, and Lant Pritchett (2008). “The Place Premium: Wage Differences for Identical Workers across the U.S. Border.” Center for Global Development Working Paper 148.

Are your wages determined by what you know, or where you live? This paper compares the wages of workers inside the United States to the wages of workers outside the United States. Comparing wages alone isn’t enough, because workers in (say) Bolivia could differ from workers in the U.S. in many ways—some of them easily observed, such as their level of education, and others less easily observed.

A rich new dataset on over two million workers around the world allows the analysis to control for several observable factors besides location that might affect wages, notably including country of birth and country of education. But just because a Bolivian in the U.S. is identical to a Bolivian in Bolivia by these observable measures, these two workers may not be identical in all ways: one of them was willing to move and incur the various costs of doing so, and one of them might differ from the other in unseen ways, such as risk-tolerance or entrepreneurial spirit. The paper uses several independent methods to estimate how such differences might bias its estimates, including new data on who what kinds of people choose to emigrate from nine different developing countries.

Following all of these adjustments the paper estimates that the wages of a Peruvian worker willing to work in the United States are about 2.6 times as much as the same person would make in Peru. This figure for Peru is typical among the 42 developing countries analyzed, but for some it is much higher. For Filipino it is around 3.5, and for a Haitian it is over 7. In other words, a Nigerian moderately-educated adult male urban formal-sector wage worker who moves to the U.S. increases his wages by several hundred percent.

The implications of these enormous differences are profound: (1) these gaps represent one of the largest remaining price distortions in any global market; (2) for many countries, the wage gaps caused by barriers to movement across international borders are among the largest known forms of wage discrimination, typically much larger than wage discrimination based on ethnic group or gender within spatially integrated labor markets; and (3) these gaps imply that simply allowing labor mobility can reduce a given household’s poverty to a much greater degree than most known antipoverty interventions inside developing countries.