Archives for July 2008

Demography III – Faces of the Future

I developed a model on Russia’s future demographic development in Matlab. First, I will describe (non-mathematically) the essentials of how it works; then I will present a range of different possible scenarios. Our data is sourced from Rosstat and the Human Mortality Database.

Demography is a social science, and as such it is impossible to make any precise predictions. As such the strategy we will use is to present four different scenarios, which include Stagnation, Low Improvement, Medium Improvement and High Improvement. (The Transformation scenario I was thinking of doing would have involved some rather complicated math and as such I leave it to a later date). They will be described below. First, an examination of basic concepts.

Introduction

The biggest single factor by far in this model are future fertility trends. It basically determines whether the population will go up or down (improvements in mortality statistics only postpone, not alter, underlying trends). The fertility rate itself is the amount of children in any given year a woman could be expected to have, calculated by adding up age-specific birth rates. The amount required for long-term population stability is 2.1 children per woman (because in most countries slightly more boys are born than girls).

Mortality trends are more useful for ascertaining things such as future dependency ratios, which are important from an economics perspective (assuming the retirement age remains constant). It can also be argued that it is an ethical responsibility of society to maximize the (healthy and fulfilling) longevity of its citizens’ lives. The life expectancy is how long a person can expect to live based on the age-specific mortality indicators of the year in question.

Net immigration, in Russia as in many other countries, typically consists of bringing in masses of young workers which help boost the percentage of working-age people within a population. Its merits are debateable. While they certainly put in more than they take out, they can also cause social unrest and lower overall productivity (if they’re uneducated cheap labor). As such, in my opinion the Japanese method of substitituting capital for labor on the factory floor (it has more than a third of the world’s stock of industrial robots) is generally smarter than importing a diverse mob of car-burners (although perhaps I have an insufficient appreciation of the spiritual benefits of multiculturalism). Digressions aside, it is clear that after a relative migratory drought in the early to mid 2000’s that followed the huge influx of ethnic Russians from the Near Abroad, economic progress and impending labor shortages are drawing a new tide of migrants, and this time many more of them are non-Slavic Central Asians and Caucasians (a total of 287,000 in 2007, probably with many more not covered by the statistics).

With an understanding of the basics, we can now reveal our first scenario.

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News 21 July: Expansion amidst Turbulence

Let’s start with two excellent new resources I’ve recently come across. Russia: Other Points of View states its objectives thus:

We believe there is need in the public forum for a venue which offers opinions and facts that at times may differ from the prevailing view in western media.

Hmm… Sounds quite similar to Da Russophile, in fact, and makes a substantial part of our News posts redundant. As such I’ll be referring to it frequently.

The other is the Moscow Defence Brief, an English-language quarterly that offers analysis on Russian, Eurasian and world military affairs from a Russian perspective.

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Education as the Elixir of Growth II

A while ago I wrote Education as the Elixir of Growth on DR, in which I noted that in most countries the educational profile is closely correlated to their level of productivity. The major exceptions are nations with resource windfalls (inflated productivity) and socialist legacies (deflated productivity). Furthermore, the greater the gap between the ‘potential productivity’, as suggested by the human capital level, and actual productivity, the greater will be the rate of economic convergence. This rate in turn depends on the openness of an economy (i.e. the rate at which it can absorb the latest know-how). Some countries, however, cannot converge to advanced industrial levels, since their human capital is set at a low level – they have reached an asymptote relative to the developed world and cannot converge without improving their educational profiles relative to the latter.

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Why Obama Will Almost Certainly Win

Read these two posts by Krugman at Conscience of a Liberal, here and here.

1. A looming recession, after seven years of stagnation in the US median wage, means that the likelihood of positive income growth this year is very small. Even assuming it’s 0% would mean that the incumbent party’s nominee, McCain, can be expected to lose by an 8% margin in the straight line fit below. To break even income needs to grow by around 2%, which looks more unlikely with every new financial breaking story.

More likely, it will be around 0% or worse and McCain would be facing a landslide defeat, as in 1980.

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Victimized Venezuela

Chavez is frequently shafted in the Western media, who allege that the only reason the Venezuelan economy is doing well is because of record oil prices. This is not to mention all the invective hurled against the Chavez administration for its supposed disrespect for democracy, from refusing to renew the licenses of TV stations support foreign-sponsored coup attempts against him (while ignoring human rights violation in friendly countries in the region like Colombia, where more union workers are killed annually in than in the rest of the world combined) to the latest smear job by the Economist about crime.

But let’s focus on the economic-boom-is-because-of-oil mantra. Having disproved similar claims about Russia, I decided to investigate this further. Novel Prize winning economist Stiglitz has praised Venezuela’s economic policies. And I found this excellent paper, Update: The Venezuelan Economy in the Chávez Years by Mark Weisbrot and Luis Sandoval from 2008. I’ve quoted its main findings.

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