Jobs, poverty, and Mr. Moussavi
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
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…)
Choosing a college
I was not able to write on this weblog last week because I was visiting colleges with my daughter to help her choose where she will enroll next year. Having grown up in Iran, it is impossible to have your children go through the US system without thinking about how different they are, even though Iran’s is more or less modelled after the western education system. So, it seems appropriate to write something about the big contrast in the transition from high school to college in the two countries, which happens to be on my mind this week and which is what I do in my research. (See my commentary on concour reform, on women in universities, and a longer paper on Iranian youth.)
There is no greater contrast between the two systems of education than in how they select students for college. We know how this is done in Iran. Students work hard to get good grades, which helps them go into successively more selective schools which is all to increase the chance of getting a high score in the Big Test–Iran’s infamous concour. Iran’s system receives praise for its objectivity (computers not humans grade the test) and for its selectivity (more than a million take the test and the top universities pick from the top 1% (hear a Chronicle of Higher Education reporter visiting Iran praise the concour’s selectivity–past minute 8). What proponents of Iran’s concour miss are the costs of objectivity and selectivity. (more…)
Mothers and child education
Today the New York Times published my letter to the Editor (posted here on April 9), in which I made the point that mothers focused on educating two children tend to think more long term and be less apocalyptic.
There is a lot more good that happens when families change their primary role from procreation to production of human capital–economic development, for example. (Robert Lucas explains this beautifully in a non-technical article.) This process took place in rural Iran starting in the late 1980s, thanks in large part to government-provided health care and family planning for rural families. We do not know which way the causation goes here: is having fewer children the impetus to invest more in children, or does the desire to invest in children cause lower family size? Economists have spent a great deal of time disentangling the relationship between the quality and quantity of children. There is a lot of evidence globally that greater desire for education, often because its rewards have increased, is necessary to lower fertility. (more…)
Roger Cohen on Iran
Today’s New York Times has an excellent opinion piece by Roger Cohen (“Israel Cries Wolf”). In his columns since his visit to Iran in February, Cohen has been busy countering the myth of Iran as a failed state and failed society. In this piece he is exposing Israeli prime minister Netanyahu’s Iran paranoia who has labeled Iran’s leaders a “messianic apocalyptic cult”. Cohen wonders if this is the same leadership that, “has survived 30 years, ushered the country from the penury of the 1980-88 Iran-Iraq war, shrewdly extended its power and influence, cooperated with America on Afghanistan before being consigned to “the axis of evil,” and kept its country at peace in the 21st century while bloody mayhem engulfed neighbors to east and west and Israel fought two wars.”
I wonder to what extent the inaccurate portrayal of Iran also as a failed economy has contributed to the image of Iran as a backward, poverty-stricken, failed state. For example, last October Tom Friedman wrote in NYT, “as a real nation-building enterprise, the Islamic Revolution in Iran has been an abject failure.”
If the answer to my question is a partial yes, there is a lot of work to do to set the record straight about Iran’s economy. (more…)
Living with lower oil prices
Iranians are more likely to complain about the prices of cucumber and watermelon, but if you ask economists what are the two most important prices in an economy, they would say the exchange rate and the interest rate. The exchange rate is the price that links Iran to the rest of the world, and the interest rate is the link between the present and the future. If a government can get these prices right, it has done half of its job in economic policy. (more…)
Have the poor become poorer under Ahmadinejad?
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?
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…)
Claims of rising poverty in Iran
“Give me a poverty scenario and I will produce the numbers to support it,” is a saying among those who work with poverty numbers denoting the flimsiness behind the science of poverty analysis. In this season of presidential elections in Iran, a scenario much in demand is that poverty has increased under Ahmadinejad. There are newspaper reports of research that offer evidence for just such a scenario (for examples, see reports in Persian here, here, and here), that seem influential but have not gone through the usual academic scrutiny. A few months ago I commented on another high profile poverty report that appeared last year in a journal published by the Central Bank of the Islamic Republic of Iran, using faulty methodology to show that poverty has increased. A study by a serious researcher, Professor Davoud Souri of Sharif University of Technology in Iran, was published last week on the prominent Persian website Rastak which is dedicated to “free market economics”, is a notch above the rest in academic rigor and therefore worth a closer look. (more…)
Myths about Iran’s economy
Are living standards as poor as they say?
Western journalists who travel to Iran get an earful of complaints about how bad things economic are. The World Bank disagrees. Iranian GDP per capita in 2007 stood at $10432 (in 2005 Purchasing Power Parity dollars), which is only one-forth that of the of the United States, and less than a thousand dollars below Turkey’s. In terms of average growth rate of GDP per capita, Iran has actually done better than in the ten year period 1997-2007, 3.5% compared to 2.5% for Turkey. These numbers are readily available from the World Bank’s World Development Indicators website.
There is no shortages of complaints one can have about Iran’s economy (high youth unemployment, high inflation, and stagnant productivity, to name a few) , but a low standard of living is not one of them. (more…)
Tyranny of numbers 
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