Tuesday, November 27, 2012

Proficiency in English.


Proficiency in English.

English has become the world’s language. It is probably the most important language ever. Today, no professional can survive without a proficient level. This is almost a fact everywhere, although, there are differences between professions and countries. It´s much more important for an economist than for a firemen it´s much more important in a small country that depends on international trade than a big one. However, in broad terms, it can be said that,  wherever you live, whatever you do, you better learn and become proficient in the use of the English language. 

Its importance will only increase in the future and second languages will not get even closer. This is not specific of languages buut a common consequence of globalization. International trade and growing international relations need and demand less costs of transactions, language diversity only increases it.

EFP (Education First) shows in this map the level of English per country and some interesting correlations.



Sunday, November 18, 2012

World inequality

On the first of November Branko Milanovic updated his inequality calculations. He has been doing so since early 90s and today are a world reference.

Milanovic defines three types or concepts of inequality: 1) inequality between countries without weighting by population size, 2)the inequality between countries  weighting by population, and 3) the global inequality between citizens.

By his own words "Inequality 3 is  the  global inequality, which is the most important concept for  those interested in the world as composed  of individuals, not nations. Unlike the first two concepts, this one is individual-based: each person, regardless of her country, enters in the calculation with her 
actual income"

The evolution of the three Inequality concepts are shown in the graph below:


Contrary to what many people states, world inequality has been declining in the last 20 years, at least by Concept 1 and 2. For Inequality type 3 the evolution has been flat for the last 30 years but declining in the last 10 years.

Milanovic states that "the period might have witnessed the first decline in global inequality between world citizens since the Industrial Revolution."

But,

"The decline however can be sustained only if countries' mean incomes continue to converge (as they have been doing during the past ten years) and if internal (within-country) inequalities, which are already high, are kept in check. Mean-income convergence would also reduce the huge "citizenship premium" that is enjoyed today by the citizens of rich countries."

So, the main driver of the lower inequality recent trend is that countries' GDP per capita are now much more similar than before.

The western world is not aware of this, and their perception is that inequality has risen. This has been, in fact, the case for citizens in Western contries:

Sunday, November 11, 2012

Intrade

For those who don’t know yet about Intrade.com let me introduce this website. Intrade.com is what we could call the stock exchange of political issues. Well, in fact they include not only political issues but also related to weather, current events, foreign affaires,… They define it as:
is a prediction market. What is a prediction market? It's a market that allows you to make predictions on the outcome of hundreds of real-world events. Stock exchanges find the price of stocks, and futures markets find the price of commodities. Prediction markets find the probability of something happening - a predefined, uncertain future event.
The idea is just brilliant. Let’s just hope that only real event affect share prices and not the other way around. It is not hard to imagine that one day profits from shares could affect political decisions.

Monday, November 5, 2012

Government and the inequality policies efficiency


 Let´s imagine that the only function of a Government were to redistribute income to make societies more equal. An easy way to measure the efficiency of each Government would be then to calculate the difference between the Gini index before taxes and subsidies and after.

It is fair to mention that not all Governments are of equal size, some are bigger than others and therefore more capable of redistribute income. To measure Government size a “% Government expenditure over GDP” variable might be used.

The following graph shows the relation between “% Government expenditure over GDP” (horizontal axis) and the reduction of the Gini variable (before and after taxes and subsidies) (vertical axis).




The residuals of the fitted values might be understood as the efficiency given the size of Government.



If all the assumptions of this piece are correct Germany’s Government would be the most efficient and the UK’s the least.