« Sentences to ponder | Main | Should the SEC and CFTC be consolidated? »
Income per natural
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...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 pointer is from Will Wilkinson, here is the paper itself. By the way, can you guess the country with the highest income per natural? It's the United States (ahem), with Norway and Luxembourg close behind. Scroll to pp.34-35 of the paper for a full list. Bermuda does surprisingly well. Guyana has the biggest difference between income per capita and income per natural, at over 100%.
Posted by Tyler Cowen on March 31, 2008 at 09:53 AM in Data Source | Permalink
Comments
Not too many countries are in the negative column. And most of those which are seem to be pretty affluent places.
Posted by: Peter at Mar 31, 2008 10:23:36 AM
So the biggest export from places like Guyana are the people with the best abilities or most motivated?
Posted by: rorkesdrift at Mar 31, 2008 11:18:08 AM
For at least one of their data points they are woefully wrong; that being the United Arab Emirates (I know about this because I lived there for three years). They claim that the income per natural is lower than the GDP, but naturals comprise only about 20% of the country - about 75% of the population are low-paid imported workers who make much, much less than the locals. The majority of million or so Emiratis have $100k+ incomes, whereas most of the 3-4 million foreign workers make less than $20,000/year (for educated Indians and other Arabs) down to $300/month (for unskilled laborers). Only a small percentage of the foreign workers are highly skilled, highly-paid westerners. Thus, the "income per natural" is likely 3 or 4 times the per capita GDP.
The same is largely true of all other Gulf countries, and yet the authors have similar statistical patterns for each.
If they're that wrong on stuff I know about, I'm inclined to believe they're wrong on most of the other stuff. This (non-peer-reviewed) "report" needs to go straight to the circular file.
Also, they use year 2000 GDP data. The rise of energy prices and depreciation of the dollar since then have made Americans quite a bit poorer since 2000, relative to many other countries.
Posted by: Bartman at Mar 31, 2008 11:28:34 AM
Am I missing something? This seems a statement of the obvious. Of course hardly any country is in the negative column, and those few are quite small amounts. Seems like statistical noise.
The set of "naturals" by definition includes those who've had the gumption to emigrate and make a better life for themselves. Of course it will always be greater per capita than "residents"... unless the country has a policy of kicking out its losers!
Posted by: Bob Knaus at Mar 31, 2008 11:54:30 AM
I'm curious about how much this refers solely to health-related professions. The United States and much of Europe now draw huge percentages of trained doctors and nurses out of the developing world into our health sector. This has the dual effect of draining the resources of developing countries who need these people the most and slightly suppressing the wages of health care workers in developed countries.
Nurses from Africa, Latin America, and poor parts of Asia can make much more money elsewhere, in better conditions, with more resources for them to do effective work.
Posted by: The other Eric at Mar 31, 2008 11:58:26 AM
I think that this effect comes in two parts -- emigrants leave to get better jobs (human capital story), but they also leave behind worse conditions (institutional story). I wonder how "global taxation" schemes (as in the US) discourage people from leaving. They may "serve the country. but they hurt individuals.
Posted by: David Zetland at Mar 31, 2008 12:28:31 PM
David:
The US is the only industrial country I know of that taxes its nationals who are overseas. But those people do get an $85,000 deduction, plus they get to deduct any foreign taxes paid, so I don't think it's a very great disincentive, in the case of US expats.
(Canada has mulled taxing overseas citizens since the farcial evacuation of thousands of ingrate "Canadians" from Lebanon in 2006, but I think that furore has blown over.)
Are there any developing countries that attempt to tax citizens abroad? Note that many economic migrants pay voluntary "taxes" to their home countries in the form of remittances sent back to relatives. That's a golden goose most countries would find politically difficult to kill by extra-terretorial taxation.
Posted by: Bartman at Mar 31, 2008 12:46:34 PM
A very real and relevant unbiased question, it seems to me, is GDP per capita among native born.
Posted by: michael vassar at Mar 31, 2008 2:00:06 PM
This is much more than "a statement of the obvious," because it highlights what is normally hidden.
Think of it this way, if a high-earning Salvadorian (for his country) leaves El Salvador, the income of El Salvador goes down. If this person moves to the United States and earn less than the average US resident (even while increasing his salary substantially from his Salvadorian level), the income of the United States goes down as well.
But if this person works in the U.S. and sends more to El Salvador in remittances than he would have made had he remained in El Salvador, both countries win.
With traditional statistics, it looks like both countries lose (because average wages in both countries dropped). In reality, El Salvador wins with more money and the U.S. wins with a good tax-paying worker who can and probably will climb the economic ladder.
It reminds me of the old quip (Will Rodgers?): when the Okies moved to California, it increased the average intelligence of both states.
Posted by: Peter Moskos at Mar 31, 2008 2:33:01 PM
About the UAE, I had the same reaction as Bartman.
Is the resolution that these are predicted values, not the actual capita per national?
Posted by: John B. Chilton at Mar 31, 2008 3:13:02 PM
To belabor the UAE case a bit more, it's worth noting that "naturals" in this paper refers to whether you were born in a country, not to whether you are citizen. Most "naturals" emigrating from the UAE would be non-citizen children of foreign workers (but not the lowest income foreign workers who are not permitted to have families with them). It is rare that an Emirati would emigrate.
Posted by: John B. Chilton at Mar 31, 2008 5:31:33 PM
Regarding Emiratis, Saudis, etc., the paper also mentions that they adjusted GDP/person for a few particular states for very skewed income distributions. I believe that Saudi Arabia, the UAE, Qatar and Bahrain were on that list. (I'm too lazy to look up the details right now.)
Posted by: Anthony at Mar 31, 2008 9:14:25 PM
bartman, the rise in the oil prices since 2000 has made the residents of some oil-producing countries richer relative to Americans, but the fall in the dollar won't have any effect on comparative incomes if PPP numbers are used, as they are in the referenced table. So you are a little off base.
Posted by: y81 at Mar 31, 2008 10:05:03 PM
Hmm. In order to make this work, they assume that immigrants in other OECD countries make the same percentage of average income as that immigrant group does in the US (page 6 in paper). That simplifies things, but it seems very, very dubious.
Posted by: Virgule at Mar 31, 2008 10:58:10 PM
"the fall in the dollar won't have any effect on comparative incomes if PPP numbers are used"
??? A reduction in the value of your currency decreases your purchasing power.
Posted by: Finnsense at Apr 1, 2008 1:18:52 AM
Finnsense, the recent "fall" in the value of the dollar is in its forex value, not its PPP value.
Posted by: y81 at Apr 1, 2008 9:28:51 AM
On UAE: Yes it's true, this calculation makes the simplifying assumption that the vast majority of residents in each developing country are naturals, which is true for almost all countries on earth, but not for the very exceptional case of UAE. But the purpose of this calculation is to point out the increase in naturals' income due to emigration, and for UAE you'll note that this is roughly zero. This accords with reasonable intuition about the world: the burden of proof would lie on anyone who claimed that people born in UAE typically experience enormous increases or decreases in their wage prospects solely by moving to another rich country. (How could the gains to migration for people born in UAE be large when their economic prospects at home are so good? And if they vastly decrease their earning prospects by emigrating, why would they do that?) So even for the extreme case of UAE, the bottom line of these estimates is quite reasonable. Even if it were way off, though, it's so exceptional in this regard that the rest of the estimates remain of interest.
Yes, it is a statement of the obvious that people who leave poor countries to live and work in rich countries typically earn (much) more than they could earn if they hadn't left. What isn't obvious to many people is that welfare gains arising from such movement should be counted as part of the welfare of people from poor countries. If we *define* the best single measure of the material welfare of Albanians to be the income per *resident* of Albania, then we have *defined* international movement as something that does not affect Albanians' material welfare. Since, as commenters point out, it's obvious that that isn't true, then we have to wonder why anyone would define people's material welfare in a way that cannot be affected by movement.
To me the most interesting statistic in the paper is that, by the World Bank's $2/day poverty line, more than a quarter of all Haitians who have escaped poverty have done so in the United States (Table 3). If you're interested in reducing poverty for Haitians, that should stun you. Leaving Haiti isn't an *alternative* to reducing poverty for Haitians -- it is already, today, one of the principals routes of poverty reduction for Haitians collectively. Restrictions that block the movement of people, then, eliminate one of the principal extant routes of poverty reduction for one of the poorest countries in the world. When those restrictions are enforced by people who have already escaped poverty, the ethics of such acts lose the false clarity they take on in so much debate about migration. If this is a statement of the obvious, then I'm glad to hear it, because it means that people already understand this crucial point!
Posted by: Michael Clemens at Apr 1, 2008 11:20:31 AM
GNP vs GDP accounting anyone? By the way on average GDP per capita is the same as GNP per capita. As far as I know the Earth CA is 0. This is like the myth that men have sex more often than women which if we exclude masturbation and gay sex is completely false.
Posted by: Joen at Apr 1, 2008 2:20:30 PM
I would want to see more distribution data on the Bermudians. The private boarding school where I teach has a large number of students from Bermuda, and I have gathered the following from them:
1) There is a striking divide between rich and poor (which is also the gap between white and black; all our Bermudians are white, and I was startled to learn this is not true of the island population at all);
2) The education system in Bermuda is terrible; there are a few decent private schools, but at the higher levels even those are vastly outperformed by decent boarding schools elsewhere, and if you want to go to college you have to leave the island.
In other words, I suspect that Bermuda does well because it has a small but significant minority of super-rich people doing lucrative things off-island, which would mean also that the high average is not relevant to most people.
Posted by: Andromeda at Apr 6, 2008 9:11:23 AM
and excellent credit 徵信performance.
I love this job;I work brought endless fun.I hope that the formal減肥I appreciated the boss
Posted by: coffee at May 23, 2008 11:03:29 PM
