i dream of gini

discussion with Gustav Ranis. leading development economist who helped build HDI. not wikipedia entry. maybe i should create one.

key takeaways:

balanced growth (diversification) driven by strong agricultural growth. p (see below) should grow, people should be absorbed.

dutch disease – in foreign aid donor countries want to give aid, recipients are eager to receive. money flows fast. little reason for change.

dutch disease is an economic concept that tries to explain the apparent relationship between the exploitation of natural resources and a decline in the manufacturing sector combined with moral fallout.

protection of infant industries is addictive. botswana and diamonds is interesting case study. can they move upstream? not many cases of success

you can eat the cake and keep it two- growth with labor intensive jobs eliminates poverty and keeps income distributions fair

poverty lines are poor measurements – they are set low. can mis-align focus on crossing the line.

remittances, especially domestic ones are under researched

see also:

http://www.econ.yale.edu/~granis/papers/Causal-Chain-between-HD-and-EG.pdf“Causal Chain between Human Development and Economic Growth,” HD Insights, March 2007, Issue 6.

http://www.econ.yale.edu/~granis/papers/human-develop-poverty-2006.pdfHuman Development: Beyond the HDI,” with Frances Stewart and Emma Samman in Poverty in Focus, Dec 2006, pp.12-14.

Composition of Human development index and related indices explained: http://hdr.undp.org/en/humandev/hdi/

Key terms:

MEG – modern economic growth

classical theory, new growth theory. new classical school (chicago school)

there should be an agricultural revolution prior to an industrial revolution

urban informal sector – agriculture surplus of labor moving into urban area, not finding a job. provide low level services (watch your car for a cigarette) and are income sharing – bring some money back home for people to eat – not real income earners – often supported by family back in rural area

see works of simon kuznets 1971 economics noble on economic development

if you are not familiar with HDI, please take a look

human development index (HDI)

growth is necessary but not sufficient. GDP

rather than measuring income, measure what income can buy:



infant mortality rate (IMR)

inequality and income distribution

some countires who have done well, do it post tax, not pre-tax (scandinavian)

inequality as measured by gini coefficient:

who gets the benefits of growth? gini coefficient.

why is gini (ineqaulity increasing)

taiwan is an exception. chimneys in the countryside. labor intensive non-agriculture.

labor intensive agriculture means lower gini.

industrialization is less equally distributed. higher gini

strong natural resources. elite gets a hold. uses is as they like. higher gini

education is a key role, primary, secondary and tertiary.

see also Kuznets curve is the graphical representation of Simon Kuznets‘s theory (‘Kuznets hypothesis’) that economic inequality increases over time while a country is developing, then after a critical average income is attained, begins to decrease.


agricultural Surplus and its uses

L= V+B

Labor= V people still in agriculture + B people out of agriculture


p (population increase)


consumption (assumed average)

O= B/L

theta is amount of people out of agriculture.

1-O= V/L

p=Lc/L(1-O)= c/(1-O)

so if there is growth, how is it distributed. consuption adjustment and allocation adjustment

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