Category Archives: Development

Income Per Natural

As usual, excellent and exciting work from Michael Clemens and Lant Pritchett:

Income Per Natural: Measuring Development as if People Mattered More Than Places

It is easy to learn the average income of a resident of El Salvador or Albania. But there is no systematic source of information on the average income of a Salvadoran or Albanian. In this new working paper, research fellow Michael Clemens and non-resident fellow Lant Pritchett create a new statistic: income per natural — the mean annual income of persons born in a given country, regardless of where that person now resides. If income per capita has any interpretation as a welfare measure, exclusive focus on the nationally resident population can lead to substantial errors of the income of the natural population for countries where emigration is an important path to greater welfare. The estimates differ substantially from traditional measures of GDP or GNI per resident, and not just for a handful of tiny countries. Almost 43 million people live in a group of countries whose income per natural collectively is 50 percent higher than GDP per resident. For 1.1 billion people the difference exceeds 10 percent. The authors also show that poverty estimates are different for national residents and naturals; for example, 26 percent of Haitian naturals who are not poor by the two-dollar-a-day standard live in the United States. These estimates are simply descriptive statistics and do not depend on any assumptions about how much of observed income differences across naturals is selection and how much is a pure location effect. Our conservative, if rough, estimate is that three quarters of this difference represents the effect of international migration on income per natural.

The bottom line: migration is one of the most important sources of poverty reduction for a large portion of the developing world. If economic development is defined as rising human well being, then a residence-neutral measure of well-being emphasizes that crossing international borders is not an alternative to economic development, it is economic development.

Hat tip to Wilkinson.

Flows, not stocks, of poverty

Anirudh Krishna notes that while there is a lot of research characterising the stock of poor people, there isn’t much work on the flows into and out of poverty.

Here’s a table from a recent presentation (pdf) by Professor Krishna.

	Escaped poverty	Became poor	Change in poverty
Rajasthan	11%	8%	3%
Gujarat	9%	6%	3%
Andhra	14%	12%	2%
West Kenya	18%	19%	-1%
Uganda	24%	15%	9%
Peru	17%	15%	2%
North Carolina	23%	12%	11%

Studies that focus on changes in the level of poverty mask a lot of “steady-state” turnover. Such churning has a lot of implications for human welfare and policy effectiveness:

Because escaping poverty and falling into poverty are caused by different factors, looking only at the figure for net change will not help to develop appropriate policy responses. The net change in poverty over any period of time is obtained by subtracting one causal stream (escape) from another and separate causal stream (descent). It does not as such have an independent causal significance.

Rich country doctors' stupid moral claims about poor country doctors

Pablo spots stupidity:

Rich countries are poaching so many African health workers that the practice should be viewed as a crime, a team of international disease experts say in the British medical journal The Lancet…“The resulting dilapidation of health infrastructure contributes to a measurable and foreseeable public health crisis,” the article said. “The practice should therefore be viewed as an international crime.”

If anyone contributing to a phenomenon that might impede economic development is a criminal, we’re going to need a few more jails. Michael Clemens has already refuted this brand of moral nonsense:

“Ethical recruitment”, the mis-named practice mentioned in the BBC article of taking steps to block the hiring of African professionals, treats Africa as a homogenous mass because it applies to all countries indiscriminately.

If you think that limiting the movement of Ghanaian doctors is justified by the fact that Ghana doesn’t have enough doctors, ask yourself: Does Ghana have enough entrepreneurs? Does it have enough engineers? Does it have enough wise politicians? The answer is ‘no’ across the board, so the logical conclusion of this sort of thinking is that we will somehow develop Ghana if we stand at the airport and prevent all Ghanaians with any kind of skill from leaving, preventing them from accessing the very high-paying jobs to which most of us living in rich countries have access by birthright alone. That is ethically problematic at a minimum, as well as ineffective — trapping entrepreneurs in Ghana would not produce an efflorescence of investment.

In addition to being ethically questionable, the Lancet’s claim is factually incorrect. Clemens’ post also explains that the international movement of health care professionals is not a binding constraint on improving African health.

Rich country doctors' stupid moral claims about poor country doctors

Pablo spots stupidity:

Rich countries are poaching so many African health workers that the practice should be viewed as a crime, a team of international disease experts say in the British medical journal The Lancet…“The resulting dilapidation of health infrastructure contributes to a measurable and foreseeable public health crisis,” the article said. “The practice should therefore be viewed as an international crime.”

If anyone contributing to a phenomenon that might impede economic development is a criminal, we’re going to need a few more jails. Michael Clemens has already refuted this brand of moral nonsense:

“Ethical recruitment”, the mis-named practice mentioned in the BBC article of taking steps to block the hiring of African professionals, treats Africa as a homogenous mass because it applies to all countries indiscriminately.

If you think that limiting the movement of Ghanaian doctors is justified by the fact that Ghana doesn’t have enough doctors, ask yourself: Does Ghana have enough entrepreneurs? Does it have enough engineers? Does it have enough wise politicians? The answer is ‘no’ across the board, so the logical conclusion of this sort of thinking is that we will somehow develop Ghana if we stand at the airport and prevent all Ghanaians with any kind of skill from leaving, preventing them from accessing the very high-paying jobs to which most of us living in rich countries have access by birthright alone. That is ethically problematic at a minimum, as well as ineffective — trapping entrepreneurs in Ghana would not produce an efflorescence of investment.

Rich country doctors’ stupid moral claims about poor country doctors

Pablo spots stupidity:

Rich countries are poaching so many African health workers that the practice should be viewed as a crime, a team of international disease experts say in the British medical journal The Lancet…“The resulting dilapidation of health infrastructure contributes to a measurable and foreseeable public health crisis,” the article said. “The practice should therefore be viewed as an international crime.”

If anyone contributing to a phenomenon that might impede economic development is a criminal, we’re going to need a few more jails. Michael Clemens has already refuted this brand of moral nonsense:

“Ethical recruitment”, the mis-named practice mentioned in the BBC article of taking steps to block the hiring of African professionals, treats Africa as a homogenous mass because it applies to all countries indiscriminately.

If you think that limiting the movement of Ghanaian doctors is justified by the fact that Ghana doesn’t have enough doctors, ask yourself: Does Ghana have enough entrepreneurs? Does it have enough engineers? Does it have enough wise politicians? The answer is ‘no’ across the board, so the logical conclusion of this sort of thinking is that we will somehow develop Ghana if we stand at the airport and prevent all Ghanaians with any kind of skill from leaving, preventing them from accessing the very high-paying jobs to which most of us living in rich countries have access by birthright alone. That is ethically problematic at a minimum, as well as ineffective — trapping entrepreneurs in Ghana would not produce an efflorescence of investment.

Microfinance in the United States

Well, this is ironic:

Bangladesh’s Grameen Bank has made its first loans in New York in an attempt to bring its pioneering microfinance techniques to the tens of millions of people in the world’s richest country who have no bank account.

The bank’s entry into the US, its first in a developed market, comes as mainstream banks’ credibility has been hit by the mortgage meltdown and many people are turning to fringe financial institutions offering loans at exorbitant interest rates.

Can decoupling insulate Asian growth?

Decoupling is a matter of degree and type, reports the FT:

Thailand is a good example. Recent economic growth has been powered primarily by exports, about 12.5 per cent of which went directly to the US last year, down from about 20 per cent when the previous US recession struck in 2001.

Yet Thailand is not as insulated as this might suggest. Sethaput Suthiwart-Narueput, chief economist at SCB Securities, says Bangkok remains vulnerable to a US slowdown since most of its exports to China – about 9.5 per cent of total shipments, up from 4.4 per cent in 2001 – are components used to make goods bound for the US.

The picture is not black and white and decoupling is not an “either/or phenomenon”, says Paul Sheard, global chief economist at Lehman Brothers. Asia emerged relatively unscathed from the 1991 US recession but was much harder hit by the “tech recession” of 2001. Similarly, this time, depending on the precise nature of any downturn, commodity-rich Australia, Indonesia and Malaysia might fare better than, say, countries specialising in electronics, such as Taiwan or South Korea.