Tyranny of numbers

Off target in subsidy reform

Posted in General, Inequality, Macroeconomy, Poverty by Djavad on December 6, 2009

This week the bill to target subsidies, intended mainly to reduce subsidies for energy products, left Iran’s parliament (majlis) for the Guardian Council.  The Council has the last word on matters legislative, and may well decide to kill the bill because the government does not want to implement it with the modifications added by the parliament.  President Ahmadinejad, known more for its populist inclinations than pro-market sentiments, has taken an unlikely position to reform Iran’s $60 billion subsidy program (more than 15% of national income) on energy, food, and a few other items.  But the dispute over who should control the revenues saved from the bill’s implementation (the subsidy fund, for short) threatens to derail this historic effort to wean Iranians off cheap energy.  If the bill survives the Guardian Council, it is sure to die in implementation.  Raising prices for basic commodities in the highly charged post-election political atmosphere of Iran is difficult enough, an unwillingness government is not likely to forge ahead with doing so.  (more…)

Reform of energy subsidies

Posted in General, Inequality, Poverty by Djavad on October 22, 2009

At long last and after decades of talking about doing something about the subsidies, there is a bill before Iran’s majlis to target (but not remove) subsidies.  I could not locate the bill itself but my impression is that it only addresses energy subsidies and not other subsidies such as food and medicine.  So far only 5 of the bill’s 14 articles have been passed, but the government already has the mandate to raise prices on energy products over the next five years.  The bill has been criticized from both the Right and the Left, which leads me to think it must be a move in the right direction. (more…)

The Revolution and the Rural Poor

Posted in Education, General, Poverty by Djavad on October 7, 2009

A short article of mine with this tile  just came out in the latest issue of the Radical History Review (restricted access).  This is an unlikely outlet for me, but then to say anything positive about Iran these days sounds radical.  The problem that critics ignore is that, although policies matter greatly, all improvements in living standards, health and education are in the end the achievements of individuals, families, and communities.  A rural girls who studies at night derives hope somewhere from a society that says to her you belong and if you work hard we will treat you fairly, but without parents who encourage her, she will probably not go to school. (more…)

Is the election pitting the poor vs. the middle class?

Posted in General, Poverty by Djavad on June 9, 2009

Every day this seems more like the real story of the 2009 election.  Class lines are more clearly drawn in this election than in the past.   The common political narrative of reformers vs. conservatives is good description but not good political analysis.  Political leanings have social and economic roots that makes them sensitive to the internal dynamics of the society.  There are two fault lines that run deep in the Iranian society–the rural vs. urban and the poor vs. the middle class–both of which seem to be reflected in the political divisions that have come to the fore in this election. Crude personal observations (backed by TV images!) suggest that the supporters of the two leading candidates are socially diverse: the poor (and the rural?) are more likely to vote for Mr. Ahmadinejad and the middles class in either location is for Mr. Moussavi. (more…)

Rising inequality in Iran: who is to blame?

Posted in Inequality, Poverty by Djavad on May 25, 2009

There have been reports of rising inequality under the Ahmadinejad’s administration (for example, in the Persian sites of Rastak and Aftab), which, unlike their claims for rising poverty, are grounded in facts.   Survey data show convincingly that inequality has increased in the last few years, but what has caused it is uncertain and subject to dispute.  The popular explanation (popular among reformists) for the rise in inequality in recent years is, of course, President Ahmadinejad policies.  But there is a deeper, somewhat related, explanation which should not be overlooked– the oil boom itself.  Deciding which explanation is more important goes to the heart of political economy questions that have occupied many minds in Iran in recent years. (more…)

Stagnant rural incomes

Posted in Inequality, Macroeconomy, Poverty by Djavad on May 22, 2009

The gap between rural and urban incomes has been widening because the rural areas appear to have missed the recent boom or President Ahmadinejad’s redistribution. According to survey data, in 2007, the gap between rural and urban per capita household expenditures reached its highest level, nearly 50 percent, up from 45 percent in 2004.  During these three years, when urban families enjoyed (a modest) 3.5 percent annual growth, rural expenditures grew by zero percent!   Why the rural economy has fallen behind or out of national favor is anybody’s guess, but here are a few leading explanations. (more…)

Jobs, poverty, and Mr. Moussavi

Posted in Employment, General, Poverty by Djavad on April 28, 2009

A news item on Iran’s “Worker’s news agency” (ILNA), in Persian, which belongs to the workers’ organization House of Workers, reads, “A wealthy country in which people are poor is not Islamic.”   This is a curious title for a report of a speech by Mr. Moussavi which is entirely about jobs, unemployment and productivity (delivered to the organization’s annual congress).  Why would something mentioned at the end of a speech (and reported in the last sentence of the news report) become the headline?  I think I know why. (more…)

Poverty and the PPP

Posted in Poverty by Djavad on April 27, 2009

There appears to be some confusion surrounding the meaning and use of the PPP (Purchasing Power Parity) among some readers of this weblog and of Rastak, where Dr. Davoud Souri published a rejoinder to my comments on his poverty calculations. (I am sorry I cannot participate in Rastak discussions because I am not good in typing or composing in Persian!)

Comparison of poverty across countries is an important subject, and impossible to do without some sort of comparison of purchasing power of different currencies across countries.  Unfortunately, market exchange rates are not generally a good guide for such comparisons, hence the need for PPP comparisons.

A good starting point for a useful discussion of poverty and policies to combat it is to establish common ideas about what is regarded as high and low rates of poverty.  To establish such benchmarks, it is natural to refer to what other countries with similar level of productivity and income are able to achieve in poverty reduction.  It is one thing to complain about poverty if countries with similar incomes to Iran are doing much better and quite another if they are not, in which case the only point of reference is one’s own high and lofty ideals.

What does the PPP mean and how is it used in  poverty analysis? (more…)

Have the poor become poorer under Ahmadinejad?

Posted in Poverty by Djavad on April 5, 2009

This is a question that many people are asking,  some wishing the answer were in the affirmative, but the truth is that with current data this question is not easy to answer.  The data we have (thanks to the good work at the Statistical Center of Iran) helps us identify the poor in 2004, the year before Mr. Ahmadinejad took office, but do not tell us what happened to these people three years later.  For this we would need panel data, that SCI used to collect, but stopped after 2003 for lack of funding (and interest on the part of researchers).

The question that we can answer with the data that we do have (Household Expenditures and Income Surveys–HEIS, for short) is whether the proportion of those poor has changed since 2004.   This is the question that several researchers, including the study that I noted in my earlier post, have asked and tried to answer.  To answer this we need to compare the distributions of per capita expenditures over time.  This appears straightforward enough, but it involves an important, and often controversial, assumption about where to place the poverty line in different years.  The assumption most often made is to take one poverty line for a given year and calculate what it would buy in other years.  As an example, let us take our poverty lines for 2007 from this study that I mentioned in my previous post (about 34600 rials per day for urban and 14800 rials  for rural individuals–a rather large gap).  How much these sums of money would be wroth in 2004?  (more…)

How poor are Iran’s poor?

Posted in Poverty by Djavad on April 2, 2009

In his perceptive comment on my previous post, Ali asks an excellent question:

“Is there a reliable relationship between calorie intake and a person’s income? Does spending less on food really mean earning less money? How about assets (house, car, …) that individual owns? Is this method consistent over years considering the change in the food items of the basket?”

The answer is yes at low levels of income, but the relationship becomes less reliable as a country’s income increases; in rich countries the direction of the relationship sometimes reverses –the poor consume more calories and are therefore more likely to be overweight–for a range of incomes. If you take any of the high-threshold poverty measures that are used in Iran, you will have trouble convincing most poverty experts outside Iran that they are poor by developing-county standards. (more…)