ECON3235 – Page 2

Argentina

September 24, 2017 by Meshry

Folklore has Noble Laureate Simon Kuznets telling his students “there are four kinds of countries in the world: developed countries, undeveloped countries, Japan and Argentina” meaning Argentina is in a class by itself. Though due to a war involving Malvinas Islands (Falklands) in terms of nuance, The Economist is not an entirely reliable source, the 100+ years of data is from reliable sources.

Reporting Accurate Inflation

Note IMF spreadsheet has n/a for Argentina’s inflation rate. This is due a remarkable turn of events where the government began reporting low inflation making it illegal for even private firms to report inflation above the official figures, which was almost always just below 10%. In yet another twist of fate, Albert Cavallo was studying at economics at MIT during the “wrong inflation period” (he is the son of Domingo Calvo Argentina’s Finance Minister during the currency board regime that ended in 2000 (when the Nestor and then Cristine Kirchner took over). He and his Venezuela born mentor Roberto Rigobon started the Billion Prices Project which uses online and cell phones to collect data on prices (as a check on country statistical offices). The problem is the definition of real GDP, the government collects data on

References:

Cavallo, Alberto. “Online and official price indexes: Measuring Argentina’s inflation.” Journal of Monetary Economics 60, no. 2 (2013): 152-165.

Alberto Cavallo and Roberto Rigobon, The Billion Prices Project: Using Online Prices for Measurement and Research Journal of Economic Perspectives , Spring 2016, Vol 30(2): 151-78

Download Paper

New data-gathering techniques, often referred to as “Big Data,” have the potential to improve statistics and empirical research in economics. This paper presents one example of how this can be achieved by using the vast number of online prices displayed on the web. We describe our work with the Billion Prices Project at MIT, and emphasize key lessons that can be used for both inflation measurement and some fundamental research questions in macro and international economics. In particular, we show how online prices can be used to construct daily price indexes in multiple countries and to avoid measurement biases that distort evidence of price stickiness and international relative price

Real Inflation Argentina

Inflacion Verdadera Venezuela (Beta)

Colombia Case Study

September 19, 2017 by Meshry

Question for all of us: Did the weakening the Colombian Peso in 2014 save Doris’s job at Crystal filling Jockey contracts? We hope so, but we have to check the real exchange rate at the USDA ERS or at the BIS (the IMF?) This version of Industry Follows Poverty includes an interactive documentary, again start with “You” but do watch all segments, including the separate “Giant Book” episode below. Note the group exercise of the workers in Medellin, why are they doing this? Be prepared to look away or skip the Rana Plaza photos, shocking and too much like the office building that just collapsed in Mexico City… horrible. Not also the machinery that makes the yarn, where do most of these machines come from? Note the value chain for the men’s tee-shirt in the “boxes” espisode: they charged $25 each, but the “you” customers look very happy, the total cost of the tee-shirts, $12.42 for the men’s shirt, left a lot of profit (it paid for these videos). An amazingly good job… very well done NPR Planet money… There are of course “American first” issues here. The U.S. produces the extremely low cost cotton, few jobs however, and you can see once you have the seeds, cotton is almost completely grown and harvest and spun into yarn but machines. Shipping costs are very low to containerization (type in the Ship’s name, Hansa Kirkenes, German owned I think, and you find where it is now). Containers and huge ships have driven down shipping costs, what happened to all the workers (“long shoremen”) that used to load and unload ships (mechanizatio took their jobs…). Try to break the men’s shirt valued added into who gets what, do we find a smiley curve (perhaps not, this is Planet Money tee-shirt). Will Colombia keep its toe hold in the U.S. market (contracts with Jockey)? How does a free trade agreement help Colombia? Is this fair? What else could explain the Medellin factory? How might the Pacific Alliance affect Crystal? What can the government do to keep these factories open. Note that we visit Doris Restrepo’s house, however the text introduces “Noreli Morales, a Colombian worker who helped make our women’s T-shirt, lives with her mom and her daughter in an apartment that has a kitchen and a bathroom.” She is on the right in the picture. She lives with her daughter and mother… depending on her age she may well have access to Colombia’s excellent condition cash transfer program (look up the name). If Doris is laid off, she would likely move into the informal sector, doing what? Factory jobs created social mobility, especially for young women and children.

***Colombia is a very interesting case study of poverty reduction and economic development, starting with the end of long and violent conflict. This case study focuses on post-conflict poverty reduction, particularly reintegration of groups formerly at war (in this case the FARC). Wracked by violence and long war, Colombia’s President Santos recently signed a peace agreement with FARC. Pope Francis and the UN are now helping Colombia integrate the opposing army into Colombia society. President Santos was awarded the 2016 noble peace prize, just before his first peace plan was rejected by voters. Fortunately, he and the FARC pushed ahead anyway, ignoring calls to exclude or further punish the FARC fighters and leaders (in contrast to lustration policies pursued by Iraq, Sri Lanka and Ukraine). How the FARC integration process works will take years to assess, the focus of this case study is role of international policies and players in shaping Colombia’s recent growth, in particular how has trade and globalization (Colombia is part of the Pacific Alliance) in reducing poverty and inequality, what has been the role of international institutions and countries in helping Colombia end conflict and redirect its economy to legal exports. What was the role of the U.S. in particular in helping Colombia end violent conflict. This is important because today Central America and Mexico face some of the same problems of violence many blame on drug traffickers. Can Mexico and the Northern Triangle countries follow Colombia path to reducing violence? Coincidentally Medellin Colombia, base of the famed Medellin cartel, is where Jockey purchased it’s shirt for women, as featured in the Planet Money special (Doris Restrepo and Noreli Morales work in this factory, Doris speaks in the “you” episode a good place to start…). Unfortunately, despite a useful free trade agreement with the U.S., this industry may be threatened by Colombia’s strong real exchange rate (is Crystal the company Doris worked for still operating in Medellin or Cartagena?).

Trade and poverty reduction in Colombia: Trade Economic Complexity Graphics

NPR’s Planet Money T-Shirt radio programs *The Giant Book that … destroys industries “You” interactive video Planet Money Introduction

Post-Conflict Recovery: According to this Washington Post story, covert U.S. help was key to Colombia fight the FARC (they may disagree). This may not be politically acceptable in many countries, but it may have helped (this is a point of discussion, the war lasted 50 years, so assistance did not help that much). The U.S. had its own reasons for helping, as part of its war on drugs. A more recent WP story complains that Colombia is still a major exporter of Coca, so the U.S. intentions may have been frustrated. Covert action in Colombia

Coffee Prices – 45 Year Historical Chart
Previous

Puerto Rico

September 14, 2017 by Meshry

CCNY Guest Lecture (November 19th, 2018)

Discussed in Class:

Education and Mobility in Latin America (and in the Bronx) Pptx Great Gatsby Curve?

El Tiempo follows Naycore from Caracas to Lima Naycore Gallango’s trip to Lima

See Enrico Moretti’s The new geography of job

Populism in Chile & Bolivia Case Study NELM solution for Venezuela (and LatAm)

Raj Chetty’s: CUNY /CCNY an inequality reducing machine!! Using Big Data to Solve Economic and Social Problems

November 21st Alfonso Cuaron’s Roma opens at the Landmark Theater (see trailer for Roma below):

Aryah Somers 2014 briefing on Unaccompanied Minors (power point) very relevant to recent Caravan debates

Aljazeera Fault Lines – The Puerto Rico Gamble – Fault Lines

Puerto Rico

Puerto Rico is only “advanced” or high income Latin American Economy. Chile and Panama are the next highest with about 35% of U.S. GDP per person. This was not always the case. In 1960 Puerto Rico was 4th among Latin American (see Figures PR-4 and PR-5 below).

See the Battle for Paradise, by Naomi Klein, on Democracy Now (& see Science Magazine editorial on Renewable energy, Science Oct 5th 2018).

President Trump cites Mayor in ‘absolute no’ to Puerto Rico statehood

Early estimates of the Hurricane Maria’s death toll (an indicator of FEMA’s efficacy) were very low, 68. However a series of studies by Puerto Rico’s health department as well as Harvard and GWU now put the death toll in the thousands, the new official estimate is over 2900, comparable to the 9-11 WTC attack. Here is the Wash Post OpEd by GWU researcher Lynn Goldman (“We calculated the deaths from Hurricane Maria. Politics played no role” WP Sept 15th 2018). Dr Goldman is the Michael and Lori Milken Dean of the Milken Institute School of Public Health**

FEMA Administrator Brock Long comments on Puerto Rican death toll numbers..

Hurricane Maria devastated its vulnerable electrical grid run by PREPA (see Frontline’s “Blackout”). Is Puerto Rico the only U.S. population center below the Tropic of Cancer (Guam, Hawaii)? Puerto Rico after Maria: A year of disruption

Naomi Klein wants to see more farms and solar power in Puerto Rico, but does not like the ides of making a Puerto Rico a Crypto Utopia (see this NY Times article)

New York and Mexico sent very much needed linemen (who may be women). Why did they step up to help in Puerto Rico? Until 1913 Puerto Rico had a Central Bank and its own currency, then what happened? (just in PR or thoughout the U.S.?) What populist President opposed a Central Bank?

Please read Chapter 1 of A&L pages 3-14 (especially Figure 1.1) and 20-33 (if you have time) better and more visual please skim this 5 page magazine article and this USA Today article.

Sachs, Jeffrey D., Andrew D. Mellinger, and John L. Gallup. “The geography of poverty and wealth” Scientific American 284, no. 3 (2001): 70-75. This map is from this article. Not Puerto Rico (and most of LatAm is tropical, above or below the line):

An NPR Planet Money special on the Jones Act (from 2014)

Puerto Rico is Latin American “commonwealth” not its own country, a territory of the United Sates. Spanish is the Island’s official language, Puerto Ricans are a very influential Hispanic group in New York and Florida. What share of Puerto Ricans now live in the U.S.? Many born in Puerto Rico consider themselves immigrants, though technically they are not. However, Puerto Rico remains a territory of the Unites States. It is not a country as defined by the UN or Bretton Woods organization (any more than New York is county). Recently Puerto Ricans voted to become the 51st state, 93% voted in favor of this idea, but only 23% of the population voted (perhaps because it was an unofficial referendum). During the 1960s and 1970s there was an active political movement for Puerto Rican Independence (President Obama pardoned one of its leaders leading to controversy at the most recent Puerto Rican day parade). This may be the reason several agencies publish data on Puerto Rico (see the WB Doing Business indicators for example). More recently however it seems but breakaway sentiment has ebbed. Like Greece however, Puerto Rico has a large debt and like Ecuador, El Salvador and Panama it does not have its own currency. Some tax and labor market policies are local, PR has its own minimum wage for example (what is it? under $7/hour if I recall). The major difference between Puerto Rico and most LatAm countries are that workers are free to migrate to the United States. At 29% of mainland income per person, in 1960 Puerto Rico’s income per person was about the same as Mexico (31% of U.S. levels) and Chile (27%), see Figure Pr-5 below

Puerto Rico News: Puerto Rico Opens Arms to Refugees From Irma’s Caribbean Chaos

Puerto Rico data

Press Release Migration

Read GDP growth

Net Migration Data PPP GDP Per Capita NY Fed Regional Data

Payroll Job Growth (PR vs U.S.)

Jeff Stein, Nov 28th 2017, Wonkblog, Washington Post Bernie Sanders to unveil a $146 billion ‘Marshall Plan’ for Puerto Rico

Notes:

*Congratulations to Fordham’s Campus Ministry for meeting its of goal $30,000 for Mexico Earthquake and Puerto Rico Maria relief.

**who is Michael Milken? What was his financial innovation (he says). Who prosecuted him and who sentenced him, how long was he in prison? Why is this cast of characters still relevant to us (apart from the GWU study now adopted as Maria’s official death toll in Puerto Rico)

References

Abel, J., J. Bram, R. Deitz, T. Klitgaard, and J. Orr (2012) “Report on the competitiveness of Puerto Rico’s economy.” New York City, NY: US Federal Reserve Bank of New York.

US Multinationals in Puerto Rico and the Repeal of Section 936 Tax Exemption for U.S. Corporations http://www.nber.org/papers/w23681?sy=681

Zadia M. Feliciano, Andrew Green NBER Working Paper No. 23681 Issued in August 2017 NBER Program(s): ITI

Puerto Rico, the Commonwealth Island and unincorporated territory of the United States, was placed under a fiscal Oversight Board by the U.S. Congress in 2016. Unable to pay $72 billion it owes to bond holders, Puerto Rico’s Government and the Oversight Board filed for court proceedings under Title III of the Puerto Rico Oversight, Management and Economic Stability Act, similar to Chapter 9 of the US Bankruptcy code. The origins of the crisis in Puerto Rico have been attributed in part to the phase out of the IRS Section 936 tax exemption program for U.S. corporations from 1995 to 2005 and its elimination in January 2006. Using industry panel data, compiled from the IRS Statistics of Income for U.S. Possessions Corporations, the U.S. Economic Census for Outlying Areas, and the mainland U.S. Economic Census, we analyze the effects of the phase out and elimination of Section 936 on the number of establishments, value added, employment, and wages in Puerto Rico’s manufacturing. Our results show the elimination of Section 936 had the effect of decreasing average manufacturing wages by 16.7%, and decreasing the number of manufacturing establishments by 18.7% to 28.0%

Despacito has almost 4.5 views (up from up from 3.7 billion in September 2017) compared to just 2.9B for Gangnam Style this is very symbolic as Korea and other Asian countries have left overtaken LatAm countries (and Puerto Rico) economically (Figure PR-6). Recall the argument of A&L, 2017 regarding why Latin America “unilaterally” liberalized in the 1980s (fortunately PR is prevented from blocking trade by the constitution, unfortunately it got stuck with the Jones Act, which raises the price of almost everything on the Island).