Rethinking CPI, Food Prices, and Living Standards in Iran
A comment from an informed reader prompted me to re-examine my earlier post on living standards in 2024/25. The issue raised was whether it is adequate—or even accurate—to deflate household expenditures with the overall CPI, as reported by the Statistical Center of Iran (SCI), while ignoring the fact that food prices have risen faster than average prices.
(more…)Sanctions and unequal regional growth in Iran
Regional equity is crucial in a centralized yet multi-ethnic country like Iran. In the language of empirical growth literature, convergence allows poorer regions to catch up, moving the country toward a more balanced standard of living. This process strengthens national unity by ensuring that no region is left behind. In contrast, divergent growth, where disparities widen over time, risks pulling regions apart and undermining national cohesion.
(more…)Why Purchasing Power Parity exchange rates are important for measuring Iran’s economic growth accurately
In this post I explain the logic of the Purchasing Power Parity (PPP) exchange rates (also known as the PPP conversion factors) that economists use to measure an economy’s total production. I also show why PPPs are especially important for measuring changes in the living stands of Iranians in recent decades. In this post I will repeat some of the discussion in a previous post, while adding more intuition and detail. Given the frequency with which misleading analyses of Iran’s economic performance and living standards appear in the popular and professional press, this will probably not be my last discussion of the subject.
(more…)Iranian living standards in times of high inflation
The Iranian year 1401 (2022/2023) was exceptional in several respects. It was the first full year of President Ebrahim Raisi’s administration (August 5, 2021 to present), which proposed a new revolutionary vision that at long last would fulfill the promises of the 1979 revolution. It was also the year that the currency fell precipitously, by 52%, and prices registered a record rate of increase (300% annual rate in June 2022). The rapid increase of prices in the early part of the year, a result of the removal of food subsidies and the Russian invasion of Ukraine, raised fears of hyperinflation, which turned out to be highly exaggerated, as inflation moderated and settled at 45% for the year. Critics of the hardline president predicted that Raisi’s economic policies was severely hurting the poor and the middle class. We finally have the data to find out if they were right.
(more…)Rising poverty and falling living standards in Iran in 2020
The Statistical Center of Iran (SCI) has released the micro data from its most recent annual Household Expenditure and Income Survey (HEIS) for the Iranian year 1399 (21 March 2020 to 20 March 2021). The results do not surprise — the downward slide in living standards and the rise in poverty that started a decade ago continues. Along with the more positive news on the GDP and employment front that have become available in the last few weeks, the survey offers a relatively accurate if mixed picture of a country and a people struggling under the Trump-Biden maximum pressure campaign. Relative to household welfare, the economy is doing better. GDP grew by 3.6% last year and last quarter (spring 2021) 200,000 more people were working compared to a year ago. This makes perfect sense since falling real wages that are hurting welfare are good for employment and production.
(more…)Fact checking the meat consumption of Iranians
The rapid increase in the price of meat in the last few months has turned this food item of dubious health value into the lightning rod for the suffering of Iranian consumers. Viewers of the BBC Persian program may recall a stark graphic that purported to show that the amount of red meat that a minimum wage worker could buy has declined from 74 kg per month in 1357 (1978) to 10 kg in 1397 (2018). (more…)
A note on measuring living standards
A few weeks ago, in this blog and in opinion pieces (here, here and here), I argued that during the three decades since the end of the war with Iraq (1988), Iran’s economic growth exceeded that of Turkey, such that by 2012, when US sanctions intensified, living standards in the two countries were very similar. My analysis, which surprised some and angered others, is because of the particular data I used to measure GDP per capita (which I also refer to as the living standard). GDP comparison is not rocket science but most journalists (and even many economists) often get it wrong. So, in this post I try to explain why it is important that we use data specifically intended for such comparisons.
The gold standard for measuring change in household welfare in Iran
The anniversary of the Islamic Revolution 40 years ago this month coincided with the deepest economic crisis Iran has experienced since the war with Iraq in the 1980s. As with top Trump administration officials, who wished the crisis on ordinary Iranians in the hope of enlisting their help in regime change, excitement among the Iranian opposition abroad is palpable. The occasion has also stimulated discussion of success and failure of the revolution concerning a wide range of issues and metrics. Much of the discussion involved comparison of living standards in Iran between now and in the 1970s (read my own comparison in Project Syndicate here.)
As before-after comparisons go, how much gold you can buy now and then offers a more edifying standard than the price of cucumbers, but it is more misleading. Prices of assets are notoriously volatile and therefore should not be used for real income comparisons. You can find several Iranian sites like this one (link in Persian) with such comparisons, but I will discuss the most visible one, the news analyses of the BBC Persian service. BBC Persian offers many informative programs and generally upholds the high standards of its parent news service, BBC World News. But in this particular case it has erred badly. A report which aired a couple weeks ago asked how much gold a teacher could buy now and in 1974. This year is perhaps not the best choice for a before-after comparison as Iran is in the middle of an economic shock engineered by the US and not the result of the normal operations of the Iranian economy (which is quite poor on its own). Nor is 1974 good as a start year because Iran received nearly four times as much oil revenues per person — a gift from the rest of the world –in 1975 as it does now. Taking 1972 and 2017 would have offered a more informative comparison, but this is a secondary point.
Tyranny of numbers 
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