If the Asian Growth Model is not Working Anymore

In 1981 poverty rate in China was 64% of the population, in 2004 the rate was 10%: it means that 500 million people stepped out of poverty (look here and here). China and South-East Asia economies were propelled by export demand and by someone else’s debt. What now? In the words of FT columnist Michael Pettis

The assumption that implicitly underlay the Asian development model – that US households had an infinite ability to borrow and spend – has been shown to be false. This spells the end of this model as an engine of growth.

It seams like bad news for economists pointing at free trade and export-led growth as a practical receipt for development.  It seams like bad news for everybody. People in developing countries need to increase their income, and it is difficult to think how they could find the money in their neighborhoods.

Tuesday, 19 May 2009

Brain matters

Saying that education strengths economic growth sounds good old common sense. But proving and measuring this relation is not immediate and therefore interesting. A reasearch, published last year, does it. Eric Hanushek, Dean T. Jamison, Eliot A. Jamison and Ludger Woessmann estimate that

each additional year of average schooling in a country increased the average 40-year growth rate in GDP by about 0.37 percentage points. That may not seem like much, but consider the fact that since World War II, the world economic growth rate has been around 2 to 3 percent of GDP annually. Lifting it by 0.37 percentage points is a boost to annual growth rates of more than 10 percent of what would otherwise have occurred, a significant amount.

Nonetheless, the research suggests that what really matters for economic growth is the quality of education. In other words it is not enough to send children to school: you have to teach them something. Using test-score performances around the world to measure the cognitive skills of students appears

that countries with higher test scores experienced far higher growth rates. If one country’s test-score performance was 0.5 standard deviations higher than another country during the 1960s (…) the first country’s growth rate was, on average, one full percentage point higher annually over the following 40-year period than the second country’s growth rate. Further, once the impact of higher levels of cognitive skills are taken into account, the significance for economic growth of school attainment, i.e., additional years of schooling, dwindles to nothing. A country benefits from asking its students to remain in school for a longer period of time only if the students are learning something as a consequence.

These results are extremely important especially for the countries of the Bottom Billion. What they are saying is that it is better to invest on the quality of the education (where rate of return is much higher) rather than spending to keep students in schools longer.

Tuesday, 17 March 2009

Crisis from the South

According to Banco de Guatemala, for the first time since 1999, in January 2009 remittances from abroad decreased by 7.75% compared to the same month in 2008. In Guatemala remittance  flows represent 11.89% of GDP. According to the World Bank remittances can represent more than 50% of rurally-based family income and for the International Organization for Migration 30.4% of the population receives money from abroad.

Causes? Probably economic crisis and deportation of  illegal immigrants from the US.

Something is certain: remittances are a strong factor in reducing poverty in Guatemala. If flows continue to decrease is more than probable that poverty will rise in a country where, according to the government, 45,6% of children are already underweight.

Monday, 16 February 2009

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RSS r-bloggers.com

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    To check for missing values in R you might be tempted to use the equality operator == with your vector on one side and NA on the other. Don’t! If you insist, you’ll get a useless results. x The post Counting Missing Values (NA) in R first appeared on R-bloggers.

RSS Simply Statistics

  • The Four Jobs of the Data Scientist
    In 2019 I wrote a post about The Tentpoles of Data Science that tried to distill the key skills of the data scientist. In the post I wrote: When I ask myself the question “What is data science?” I tend to think of the following five components. Data science is (1) the application of design […]
  • Palantir Shows Its Cards
    File this under long-term followup, but just about four years ago I wrote about Palantir, the previously secretive but now soon to be public data science company, and how its valuation was a commentary on the value of data science more generally. Well, just recently Palantir filed to go public and therefore submitted a registration […]
  • Asymptotics of Reproducibility
    Every once in a while, I see a tweet or post that asks whether one should use tool X or software Y in order to “make their data analysis reproducible”. I think this is a reasonable question because, in part, there are so many good tools out there! This is undeniably a good thing and […]

RSS Statistical Modeling, Causal Inference, and Social Science

  • Hierarchical stacking
    (This post is by Yuling) Gregor Pirš, Aki, Andrew, and I wrote: Stacking is a widely used model averaging technique that yields asymptotically optimal predictions among linear averages. We show that stacking is most effective when the model predictive performance is heterogeneous in inputs, so that we can further improve the stacked mixture by a […]
  • The norm of entertainment
    Someone pointed me to a comment that a psychology researcher wrote that he almost never reads our blog and that it “too quickly bores me.” That’s ok. I’m sure that lots of people have stumbled upon our blog, one way or another, and have been bored by it. We don’t have a niche audience, exactly; […]
  • Tessa Hadley on John Updike
    Lots to think about here. To start with, this is the first New Yorker fiction podcast I’ve heard where they actually criticize the author instead of just celebrating him and saying how perfect the story is. This time, they went right at it, with the interviewer, Deborah Treisman, passing along some criticisms of Updike and […]