The Chinese economy has changed dramatically over the last three decades. While its per-capita income was only a third of that of Sub-Saharan Africa in 1978, it has now reached an upper-middle income status, lifting more than half a billion people out of poverty. The numbers are dramatic: per capita income has doubled for more than a billion people in just 12 years. What was once a primarily rural, agricultural economy has been transformed into an increasingly urban and diversified economic structure, with decentralization and market-based relations rising relative to the traditional government driven command-based economy.
As the Carnival in Brazil kicked off last weekend, Brazilians were ready for a party. They have reasons to celebrate. Despite a lackluster GDP performance in the last two years, unemployment rates remain at record low levels.
Markus’ s post yesterday is the first on what will be one recurring blog theme here- measurement. I’ll continue the trend today with a focus on one of the most fundamental welfare constructs in economics: consumption. Specifically, how might the development researcher accurately measure household consumption through survey?
(Available in Chinese)
Food prices have received a lot of attention recently. Understandably, much of the attention is on recent developments and short term prospects. But in this blog post I try to look back at some longer term trends, in order to look further ahead.
Since the early 2000s, food related prices have trended up (Figure 1). The deflator of agricultural value added has risen 8% per year on average since 2000, after falling during the second half of the 1990s. Producer Price Index (PPI) food prices (factory gate) have risen much less because prices of other inputs into the food processing industry have gone up less and rapid productivity growth in food processing has dampened the transmission of higher raw food prices.
According to many commentators, setting the global economy on a right path these days must include a sharp increase in private consumption in East Asia. Consumption, these analysts argue, is very low across the region, and levels nearer those in advanced economies are more appropriate.
This does not seem right. Consider the following points:
The supply of electricity is a necessary ingredient for economic and social development in low income countries. Electricity is considered to be one of the most important services for improving the welfare of individual citizens. In the digital age, it is difficult to visualize development without electricity. Apart from the availability of energy per se, change in the quality of energy is one of the most important drivers of productivity.
The process of economic development necessarily involves a transition from low levels of energy consumption to higher levels where the linkages between energy, non-energy inputs and economic activity change significantly as an economy meanders through different stages of development. With such progress, commercial fossil fuels and ultimately electricity becomes predominant. Further, the expansion of electricity supply is critical to minimize the consumption of biomass fuel that has been responsible for the massive deforestation, desertification and many health problems.
All of the above sounds fairly straightforward and non-controversial, right? Not really. Count on economists for coming up with Harry Truman’s proverbial “on the other hand”. In other words, there are no straight answers as is most often the case in the infernal complexities, contradictions and ambiguities of our favorite ‘dismal science’.
In the last blog we saw that most resettlers are broadly satisfied with the resettlement process and are positive and optimistic about their lives as a whole. But…how do they feel about their lives in comparison to the very different world they lived in before relocation? What are the changes they value or regret?
The respondents were asked directly how they felt about life now compared with life before resettlement. The overwhelming majority think that life has got much better, and that the vulnerable households are even more likely to feel this way than the non-vulnerable—no vulnerable households felt that life had got worse.
In last week’s blog I showed that, when we examine consumption—a commonly used measure of household welfare—the resettled households appear to be doing relatively well, and much better than before resettlement. But economic circumstances are just one small part of what really matters to households. In order to get closer to a broader picture of “well-being”, I’m going to present some evidence of how these households themselves view their lives overall and how they feel about the changes going on around them. I hope that this will provide new insights to the question of “how are the resettled people doing overall?”
|On the Nakai plateau, a large proportion of income is non-monetary. If we fail to account for this income, we grossly underestimate the living standards of most households. (WB photo)|