Monday, January 18, 2010

How to help Haiti


I have plotted remittances and aid for Haiti, as a share of GDP (the aid data is from the World Bank, and slightly different than the OECD data used in a previous post.)

In 2008 remittances were 18.7% of Haiti's GDP. In comparison foreign aid before the catastrophe was 10.4% of GDP. Agriculture is 28% of Haiti's GDP. These 3 sources of income are a combined 57% of Haiti's GDP.

They have one thing in common: they have a low (but not zero) marginal product of labor. Having more people will not make these sources of income go up proportionally.

Why would remittances not be affected by the number of people? The reason is that other countries limit Haitian immigration. According to Gallop about half of Haiti's population would emigrate if it could, one of the highest in the world. They have not emigrated because other countries limit how many Haitians they want to absorb.

Foreign aid is somewhat responsive to population, but far from proportional. Small poor countries tend to get more aid per capita.

More workers in agriculture certainly have some value, but again given how many people there are already in agriculture (two thirds of the labor force) more workers will not add much value. The scarce land limits the value of more labor.

Haiti's per capita GDP would be 43% higher if today's aid and remittances were shared on their 1960 population instead of their current population (assuming it aid and remittances were same, but ignoring agriculture).

The idea of population control has been discredited in rich countries. The reason is that with our institutions, wealth is produced by labor. More mouths also mean more hands, so per capita income is generally not related to population size. Since more people produce more ideas, growth may even increase with population size for rich countries.

Furthermore, people like Paul Ehrlich helped damaged the reputation of population control through alarmist predictions that did not pan out (because for the world as a whole they were not true). But as is common in intellectual debates there has been an overreaction, with many economists now dismissing population entirely as a problem.

While Ehrlich was wrong in general, population growth harms the standard of living in some specific cases, namely countries where a large share of income is derived from fixed assets (in Haiti's case land, relatives abroad and the generosity of foreign nations). The most obvious case where more people reduces the average standard of living is Saudi Arabia.

Economists should be more flexible in their analysis of countries problems. Population control in not an issue in nations where there are good enough institutions to have a manufacturing sector, but a huge problem where fixed assets are an important source of wealth, such as Haiti.



31 comments:

  1. Correct me if I'm wrong, but it seems here that the more practical solution wouldn't be population control, but for the US to simply open up its border to the Haitians. Or at least open it to a much greater extent than it currently does.

    ReplyDelete
  2. This comment has been removed by a blog administrator.

    ReplyDelete
  3. This comment has been removed by a blog administrator.

    ReplyDelete
  4. What do you disagree with?

    1. The average IQ reported?

    2. The importance of this to economic outcomes? See Gottfredson - g & why it matters & Steve Hsu's discussion. http://infoproc.blogspot.com/2009/11/iq-compression-and-simple-models.html

    3. The crime rates?

    4. That these may be partly heritable?

    ReplyDelete
  5. I have no confidence that in a nation like Haiti IQ scores are 1. systemically measured the way they are in a more developed country and 2. reflect anything other than a difference in the basic opportunities available to the population.

    If you've been in some form of formal schooling since you were 5, I get the feeling you're probably going to do better on an IQ test than if you didn't. Just a thought.

    Bottom line: I don't think those scores tell you anything intrinsic about the people. I also don't really care about some bullshit mathematical model that purports to demonstrate the importance of IQ to economic outcomes.

    And what the heck do superstitous beliefs have to do with anything?

    As for crime rates, are you saying that a high percentage of Haitian immigrants are criminals, or that the amount of criminals who are Haitian is high relative to their number? Because it's not the same claim.

    Part of me feels like I'm wasting time responding to racist claims, but I do like to take people on the merit of their arguments however disgusting.

    I am far more interested in getting a response from Tino as to whether or not he thinks opening up immigration would be a more practical solution for Haiti than imposing population controls.

    ReplyDelete
    Replies
    1. Adam Your brilliant. I love your points and insight

      Delete
  6. "I have no confidence that in a nation like Haiti IQ scores are 1. systemically measured the way they are in a more developed country and 2. reflect anything other than a difference in the basic opportunities available to the population.

    If you've been in some form of formal schooling since you were 5, I get the feeling you're probably going to do better on an IQ test than if you didn't. Just a thought."

    There are tests that can be used regardless of schooling.

    And the tests have cross cultural validity. Even Robert Sternberg, found that a person with a score of 80 in Kenya would perform about as well as a person with a score of 80 in the US.

    There are a number of neurological correlates. A basic one is brain size.

    "Correlations between intelligence and total brain volume or grey matter volume have been replicated in magnetic resonance imaging (MRI) studies, to the extent that intelligence is now commonly used as a confounding variable in morphometric studies of disease. MRI-based studies estimate a moderate correlation between brain size and intelligence of 0.40 to 0.51 (REF. 28; see REF. 29 on interpreting this correlation, and REF. 30 for a meta analysis)."

    http://www.loni.ucla.edu/~thompson/IQ/NRN2004_IQ.html

    And there are consistent average group differences, which parallel those between ethnic groups & reaction time measures East Asian>>euro>>african.

    Whole-brain size and general mental ability: A review. International Journal of Neuroscience, 119, 691-731.

    http://psychology.uwo.ca/faculty/rushtonpdfs/2009%20IJN.pdf

    "As for crime rates, are you saying that a high percentage of Haitian immigrants are criminals, or that the amount of criminals who are Haitian is high relative to their number? Because it's not the same claim."

    Apparently the rate is high within the country and for immigrants. Again, you get the pattern of East Asians having lower crime rates.

    http://psychology.uwo.ca/faculty/rushtonpdfs/P&E%20Crime.pdf

    "I am far more interested in getting a response from Tino as to whether or not he thinks opening up immigration would be a more practical solution for Haiti than imposing population controls."

    Again, this is a bad idea because their iq scores predict that they will be overrepresented in an underclass.

    "Skill selection is a desirable way of addressing the problem of ethnic diversity because it is already a policy option on the table. More intelligent (or educated) immigrants would be more productive workers, and they would also have a much less objectionable social impact on the United States due to their enhanced ability to cooperate. Putnam’s concerns about deteriorating social capital form another argument for immigrant skill selection.

    When Robert Putnam came to my class five years ago, he presented some surprising and provocative results. But even more surprising is that his findings, public for at least two years, have generated so little substantive discussion among policymakers. The challenge that ethnic diversity poses to 21st century communities is significant, and meeting that challenge requires robust public discussion and debate. That discussion should include not just how we deal with the diversity of our current population, but how we can ensure future diversity causes as little harm as possible. Selecting intelligent immigrants is the smart way to begin."

    http://www.american.com/archive/2009/august/dealing-with-diversity-the-smart-way

    ReplyDelete
  7. There are tests that can be used regardless of schooling.

    What are these tests? And how can you demonstrate that schooling does not improve one's chances with it?

    Even Robert Sternberg, found that a person with a score of 80 in Kenya would perform about as well as a person with a score of 80 in the US.

    And how exactly did he "find" this? What rigorous, scientific test did he perform to come to this conclusion?

    There are a number of neurological correlates. A basic one is brain size.

    How big are the sample sizes for the experiments where these correlations are found?

    Apparently the rate is high within the country and for immigrants.

    I don't care how high it is in the country. How high is it among immigrants?

    Again, this is a bad idea because their iq scores predict that they will be overrepresented in an underclass.

    This is such junk science. If you want to make this argument, don't give me a load of crap about brain size and IQ correlations. Take a look at the Haitians who have immigrated to America, find out what their average income is, then what the income of their children is, and so on. If you can find evidence that they remain predominantly poor and criminal down a generation or two, then you can start talking this tripe.

    ReplyDelete
  8. While IQ is heritable, there is no evidence of genetic differences in IQ between races.
    However:

    1. Please do not debate this contentious issue on my blog. This is an economics blog. Take it to GNXP. In the future I will delete posts about race and IQ.

    2. While race has nothing to do with it, research has shown that low skill immigration is extremely costly for the US. Immigrants bring their culture and human capital with them. Haitians per capita income is $17.052, only half the US average.

    The American welfare state is geared towards helping the working poor, and has to provide health care, schooling, subsidized housing, public services, income support for low income immigrants.

    Your suggestion of opening the doors to mass-immigration is good for Haiti, bad for America.

    ReplyDelete
  9. "Please do not debate this contentious issue on my blog. This is an economics blog."

    Fair enough, but you can't ignore the importance of cognitive ability (regardless of race) to various social and economic outcomes (see imporantance to macro-economic outcomes below). Indeed if you commit the moralistic fallacy & rule out theories because they're offensive you're going to limit your understanding.

    http://iratde.org/issues/1-2009/tde_issue_1-2009_03_rindermann_et_al.pdf

    ReplyDelete
  10. I apologize for the IQ stuff, I allowed myself to be provoked.

    I don't know if I buy the argument that low skill immigration is costly for the US. Welfare state issues aside, our country was basically built on top of mass amounts of low skill immigration, something that has occurred over a century while the economy has continued to grow at historically unprecedented rates.

    Simplifying point: even if we grant your point that low skill immigration is bad for America's economy on net, the damage it does is so small as to not even be a blip on America's growth path, while the good it does for those immigrants and their descendents is incalculable.

    ReplyDelete
  11. "Welfare state issues aside, our country was basically built on top of mass amounts of low skill immigration, something that has occurred over a century while the economy has continued to grow at historically unprecedented rates.

    Simplifying point: even if we grant your point that low skill immigration is bad for America's economy on net, the damage it does is so small as to not even be a blip on America's growth path"

    This is based on the assumption that subsequent generations will do better. However, recent evidence shows that isn't always the case & can form an underclass.

    "Perhaps even more important than the collapse of educational achievement among the lower strata is a deterioration of the higher education that was for decades the basis of California's preeminence in science and technology. California currently ranks 40th among the 50 states in college-attendance rates, and it already faces a significant shortage of college graduates. Studies have shown that the economy will need 40 percent of its workers to be college-educated by 2020, compared with today's 32 percent. Given the aging white population (average age, 42), many of these new graduates will have to come from the burgeoning Latino immigrant population (average age, 26). By one estimate, this would require tripling of the number of college-educated immigrants, an impossibility if current trends hold. The state's inability to improve the educational attainment of its residents will result in a "substantial decline in per capita income" and "place California last among the 50 states" by 2020, according to a study by the National Center for Higher Education Management Systems.
    The mediocre education system, along with the unfriendly business climate and confiscatory tax regime, is driving educated, middle-class Californians out of the state. Between 2000 and 2005, more people with college degrees left California than came in, according to research by the Hewlett Foundation. Since then this trend has accelerated, and the state lost 2.2 million members of its young, educated, tax-paying middle class between 2004 and 2007. IRS data show that of recent migrants from the Golden State to places like Texas and Oklahoma, who average 29 years of age, 58 percent have received at least some college education and 53 percent own their homes.
    In short, we are witnessing a highly advanced and prosperous state, long endowed with superior human capital, turning into the exact opposite in just one generation. What can be done to stop this race to the bottom? The answer is simple: California and Washington need to enforce existing immigration law. Unfortunately, it is difficult to convince the public that this is necessary, so deeply entrenched are myths about illegal immigration.
    One myth is that because America is a country of immigrants and has successfully absorbed waves of immigration in the past, it can absorb this wave. But the argument neglects two key differences between past waves and the current influx. First, the immigrant population is more than double today what it was following the most massive previous immigration wave (that of the late 19th century). Second, and much more important, as scholars from the Manhattan Institute have shown, earlier immigrants were much more likely to bring with them useful skills. Some Hispanic immigrants certainly do integrate, but most do not. Research has shown that even after 20 years in the country, most illegal aliens (the overwhelming majority of whom are Hispanic) and their children remain poor, unskilled, and culturally isolated they constitute a new permanent underclass."

    http://www.npr.org/templates/story/story.php?storyId=112167023

    See also. http://www.aei.org/article/101122

    ReplyDelete
  12. 1. The most through and investigations of the fiscal impacts of immigration, by the prestigious National Research Council, found that low-skill immigration costs $120.000 per immigrant, in 2009 dollars. They even used the over-optimistic assumption that immigrants 100% converged to natives in 3 generations (not true empirically).

    2. Low skill immigration in 1850 was not a problem, because almost everyone was low skilled, and there was a strong demand for low skilled workers in agriculture and industry. Today because of technology there is almost no demand for low skilled workers. The biggest problem in America is plight of the low-skilled underclass.

    Other differences:

    * There was no welfare state in 1850.

    * There was no ideology of multiculturalism in 1850. People assimilated. Today immigrants do not assimilate, and are encouraged by the education system and media to keep their culture and language.

    * Transportation and communication costs made sure that only people who accepted to cut ties with their home country immigrated. This is no longer true.

    You theoretical argument that low-skill immigration SHOULD be good for the US economy is not really a match for the empirical observation that low-skill immigration IS not good fiscally.

    "the damage it does is so small as to not even be a blip on America's growth path"

    The fiscal cost of 50% of Haiti immigrating to the US would be $600 billion. That is comparable to the direct costs of the Iraq war so far, and certainly not negligible.
    Historically Socialists wanted to give away other people's private property. Today Libertarians seem to have little qualm in giving away Americas collective property.

    ReplyDelete
  13. First, the immigrant population is more than double today what it was following the most massive previous immigration wave

    In absolute terms or as a percentage of the US population?

    Second, and much more important, as scholars from the Manhattan Institute have shown, earlier immigrants were much more likely to bring with them useful skills.

    You do like to say that this or that study has "shown" something, though you never get down to how they actually do so. I don't buy this.

    Moreover, I don't buy your silly story about California, either. You can make projections all day long, but it is nothing compared to having actual evidence (IE--examples of this dynamic actually already having played out somewhere).

    ReplyDelete
  14. "Moreover, I don't buy your silly story about California, either."

    What don't you buy about it? Do you have education data that contradicts what the article says?

    ReplyDelete
  15. Tino,

    Don't call me a "Libertarian"; it may be enjoyable to have a convenient label so that you may make a snarky remark, but I'd rather you not presume to know me well enough to do this on my behalf.

    To #1: How did they show this, exactly?

    To #2: Ah yes, the old "demand for x category of labor" argument. Sort of a chicken and egg argument, no? The kinds of businesses that form when there is a lot of low skilled labor may be different from the kinds that form when there isn't much of it; so there's really no way to know how much "demand" there would ultimately be in the short or long run.

    You theoretical argument that low-skill immigration SHOULD be good for the US economy is not really a match for the empirical observation that low-skill immigration IS not good fiscally.

    Let's not kid ourselves here. Your so-called "empirical observation" is based on the typical econometrics-based analysis that is standard of empirical economics, right? Meaning that in order to "correct for" the many complex variables involved in such a subject, they rely on mathematical representations of what they consider to be the key variables. But those attempts to correct for complexity are based on theory

    So it's not as though I'm some abstract theoretician sitting on a cloud while you're just looking at the facts. Your evidence is just as theoretical, and prone to the same mistakes.

    ReplyDelete
  16. M,

    They don't have any data of that sort. They're making forecasts, something I have no reason to be confident in their ability to do. Show me a track record for the methodology they use, and then we can talk.

    ReplyDelete
  17. According to the Alexiev
    article they're making forecasts based on current educational results. You can quible with forecasts, but I don't see why you're so skeptical about the reported stats in the article.

    "California's educational system, once easily the best in the country, is today mired in mediocrity near the bottom among the 50 states as judged by National Assessment of Educational Progress (NAEP) tests in math, science, reading, and writing. And for the first time in its history, California is experiencing an increase in adult illiteracy. In 2003, it had the highest adult illiteracy in the United States, 23 percent nearly 50 percent higher than a decade earlier. In some counties (Imperial at 41 percent, Los Angeles at 33 percent) illiteracy approaches sub-Saharan levels.

    Perhaps even more important than the collapse of educational achievement among the lower strata is a deterioration of the higher education that was for decades the basis of California's preeminence in science and technology. California currently ranks 40th among the 50 states in college-attendance rates, and it already faces a significant shortage of college graduates."

    And in terms of demographics the numbers:

    "For a closer glimpse of what's in store for California, look at the Los Angeles Unified School District, the largest in California and the second largest in the country. Of its roughly 700,000 students, almost three-quarters are Hispanic, 8.9 percent are white, and 11.2 percent are black. More than half of the Latino students (about 300,000) are "English learners" and, depending on whether you believe the district or independent scholars, anywhere between a third and a half drop out of high school, following significant attrition in middle school.

    Even those who graduate aren't necessarily headed to success. According to one study, 69 percent of Latino high-school graduates "do not meet college requirements or satisfy prerequisites for most jobs that pay a living wage."

    ReplyDelete
  18. "Let's not kid ourselves here. Your so-called "empirical observation" is based on the typical econometrics-based analysis that is standard of empirical economics, right? Meaning that in order to "correct for" the many complex variables involved in such a subject, they rely on mathematical representations of what they consider to be the key variables. But those attempts to correct for complexity are based on theory."

    The theory is extremely straightforward. It's pretty much only based on the observation that latin american immigrants in the US are poor, and that they have been poor for many generations.

    As the US operates a large-scale redistributive welfare state (like all western nations), this in turn means that the best case-scenario is that the average US taxpayer will stop being damaged by low-skill immigration in 100 years or so. In the worst-case scenario, the damage is perpetual.

    This is of course just the fiscal impact through taxation. Perhaps worse are the cultural and other social impacts (crime, the spread of bad norms, etc.). When, as in California, the low-skill group is on track to become the majority population, that will be far more than a "blip".

    Add in the fact that any gains through lower prices for low-skill labor are likely to be very small for the native population, and the case for low-skill immigration becomes weaker still.

    ReplyDelete
  19. 1. They compared estimated taxes paid and estimated costs of the public sector. The methodology is outlined in detail here.

    http://www.nap.edu/catalog.php?record_id=5779

    2. I never explicitly called you a libertarian. I made a general remark about libertarians. If that does not apply to you, so be it.

    3. "Sort of a chicken and egg argument, no?"

    Nope, it is a technological argument. Low skilled workers have difficulty finding jobs that support them. They did not in 1850. When the do find work these days wages are low.

    4. "no way to know"

    You rely a lot on claiming we don't know. In fact we do have lots of knowledge on the expected effects of having more low-skilled people. We have data, in relative wages and employment rates for low-skilled people. We also have powerful tools in economic theory and supply and demand: if supply of low skilled workers goes up exogenously wages will go down.

    5.

    Lets not kid ourselves here: complexity will not magically save you. In America people who earn below average pay less in taxes, and collect more in government benefits. This is a powerful and simple fact. Low income people earn less but receive more of government benefits. Low-skilled immigrants are low income.

    If you have an alternative theory the burden of evidence is on YOU.

    Complexity does not change the expected results, only the variance. The costs of immigration may well be much higher than the best available analysis.

    5. You are suddenly very uncertain of everything when confronted with facts. If so, why did you confidently make the claim

    "the damage it does is so small as to not even be a blip on America's growth path"?

    If we don't know something that is cause for caution, not massive social experiments.

    Again, if you want to claim mass-immigration from Haiti is costless for America the burden of evidence is on you.

    6 "Your evidence is just as theoretical, and prone to the same mistakes."

    No it is not. Referring to the most detailed and trusted study on the fiscal impacts of immigration is not "just as" theoretical as your fact-empty claims, vaguely based on history.

    ReplyDelete
  20. They compared estimated taxes paid and estimated costs of the public sector. The methodology is outlined in detail here.

    Ah, so it only measured the cost and benefits in terms of government budgets? That's not much of a measure of how much they add to or detract from the economic well being of the average American. When they are working they are producing something, or performing some service. It's not a question of whether more budgets are used on them than tax revenue they produce. It's a question of whether or not they grow, shrink, or on net produce no difference in the size of the economic pie.

    I'd like to back off for a moment here and confess what you already know; you are familiar with a great deal more studies on this subject than I. I've attempted to pick at some of your arguments from my intuition but in the end it would be silly of me to continue this any further without getting my hands dirty with more reading, so that I could provide more detailed commentary than just "fact-empty claims".

    Thank you for engaging me from you better-read position, and thanks for providing some material for me to follow-up on this subject. As well as more than a little food for thought.

    ReplyDelete
  21. Borjas calculations that take into account the value of goods and services has a net positive effect of 10 billion for all immigrants (also the high skilled). Immigrants produce a lot of new value (200 billion according to Borjas in 2000), but almost all of it goes back to the immigrants themselves in wages.

    Thank you for your intellectual tone, hope you comment on future posts.

    ReplyDelete
  22. "The fiscal cost of 50% of Haiti immigrating to the US would be $600 billion."

    Where does this figure come from?

    ReplyDelete
  23. M: I assume it comes from multiplying half of Haiti's population times $120.

    Tino: You're welcome; I apologize if I came on a bit too strong at first. Just found your blog, looking forward to reading your future posts.

    ReplyDelete
  24. I just want to throw this out. A simple change that might help Haiti would be for the use to eliminate its sugar quota. Most Haitian income is from sugar cane, so they would benefit from the resulting price increase in sugar.

    ReplyDelete
  25. bomb:

    It might also be good for the U.S obesity problem, in reducing corn sweetener use (I have no scientific evidence, but my gut feeling is that Michele Obama is right about this.)

    ReplyDelete
  26. Great post. Edegra I always enjoy seeing another financial and economization process. I learn so much from this amazing blog. Really makes me want to pull out in my own blog.
    Caverta Kamagra

    ReplyDelete
  27. Wow… yippee, cool man... you are truly a dude. I seriously have never read an article such a type before like this. This is the first time I have seen somebody writing sense and reality. You are a good writer according to me
    Kamagra

    ReplyDelete
  28. Haiti needs all the help we can provide.


    --------------------------------
    buy viagra

    ReplyDelete
  29. I am thoroughly convinced in this said post. I am currently searching for ways in which I could enhance my knowledge in this said topic you have posted here. It does help me a lot knowing that you have shared this information here freely. I love the way the people here interact and shared their opinions too. I would love to track your future posts pertaining to the said topic we are able to read.
    Penis Enlargement | Penis Enlargement Pills | VigRX Plus

    ReplyDelete

Google Analytics Alternative