Migration fact of the day

"Today, approximately 7 million Indians work in six GCC countries, which is more than 50% of estimated 13 million foreign workers present in the GCC. The Indian workers in GCC remit about US$40 billion i.e. around 57% of the total remittances, i.e. US$70 billion India receives annually. Besides contributing significantly to the national forex reserves, the remittances received directly by the workers’ families help in poverty alleviation, support local business, promote entrepreneurship and generate employment."

That’s Zakir Hussain on the World Bank blog. Worth remembering this context next time you read a scandal about the poor treatment of Indian workers in the Gulf.

The Arab Spring: Too much education and not enough jobs

Its always nice to have your priors confirmed by some systematic data. Here is Campante and Chor in the Journal of Economic Perspectives with a nice chart showing that Arab countries do generally have higher than average unemployment and more recent growth in education than other countries.

They also find some evidence (correlation is not causation etc) that it is the interaction between unemployment and schooling that has led to political change, and not either by them self.  

The Revolution WILL be Televised

I was just thinking the last few days about how I should write something about Acemoglu & Robinson’s theory of revolution and how it applies to the Middle East.

Well Tim Harford got there first, and probably does a much better job than I would have:

What kind of concessions should protesters look for? According to the economists Daron Acemoglu and James A. Robinson, who have built a detailed series of game-theoretic models of political transition, the answer is: ones that cannot be easily undone. Tunisia’s Ben Ali will surely not return, but already activists are concerned that democratic reforms may not be entrenched, and have returned to the streets to protest. Mubarak may be Egypt’s past, but Egypt’s future is unclear.

A fresh constitution, civil rights, and credible elections are all ways of safeguarding the gains so far. The revolutionary protesters are right to insist on them; it would hardly be a surprise to see feet being dragged by those who profited from the status quo.

It is intriguing to view events in the Middle East through this game-theoretic lens. For example, Saudi Arabia’s “royal gift” of $35bn does not seem to have satisfied activists in the kingdom. That makes sense: gifts can be withdrawn. If a dictatorial government can vent the revolutionary head of steam for a while, then the momentum for reform may be dissipated for many years - especially if the ringleaders are rounded up while all is quiet.

The one thing he touches on but does not quite make explicit is the importance of television. The trouble with revolution is that you have to solve a massive coordination problem in order to get everyone out onto the streets at the same time. Nobody wants to be the first one to the party and have to make awkward small-talk with the hosts. Better to arrive when things are in full-swing.

Much has been hyped about the role of Twitter and Facebook, but it seems to me that the real driving force has been the ready news of martyrs, accompanied by moving images, live evidence of the mass crowds out there, and the proven impact shown by the departure of Ben Ali and Mobarak. It was television, not Facebook, that did this.

In the words of the rather prescient-looking Charles Kenny:

Forget Twitter and Facebook, Google and the Kindle. Forget the latest sleek iGadget. Television is still the most influential medium around…

TV is having a positive impact on the lives of billions worldwide, and as the spread of mobile TV, video cameras and YouTube democratize both access and content, it will become an even greater force for humbling tyrannical governments

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Addendum:

In the course of finding that Charles Kenny quote, I came across this marvellous paper on the economics of Baywatch.

"aid and Baywatch may have about same value [to people in dev countries]"

Revolution and the Resource Curse in the Middle East

Chris Blattman quotes Arvind Subramanian (writing in the FT)

Even if the people of Libya and Bahrain join those of Egypt and Tunisia in overcoming their cursed political systems, the economic manifestations of their rent curses will remain.

The case for the resource curse certainly sounds persuasive, but I just don’t think the evidence is really there any more, with more and more recent studies debunking it. As Charles Kenny writes in Foreign Policy,

The curse is the type of counterintuitive idea that makes for a great newspaper op-ed. Nonetheless, the curse is also the kind of counterintuitive idea where intuition may have been right to begin with.

To the extent that it does exist, the curse is not destiny, and movement towards more open societies is the best way of fighting it.

Hold tight Bahrain, hold tight Libya.

UPDATE: I found the link to some of the main research disputing the claims

7 reasons why urban growth is a natural and normal phenomenon

The town of Dubai first conducted a census in 1968 (with approximately 59,971 inhabitants then) ... According to the Statistics Centre of Dubai, the population of the emirate is estimated to be over 1,800,000 as of 2010 ... Do the math!  

(HT: Our Word is Our Weapon).

OK. I make that an annual growth rate of 8%, not to be sniffed at. 108%. Dubai has more than doubled in population every year for the past 42 years.(Hey - this is a blog - there is very little editing and short deadlines, so occasionally there will be very stupid mistakes).

Rapid urban growth is not an inherently evil thing. In fact it is probably quite a good thing. Professor Mario Polèse offers 7 reasons why:

Seven Pillars of Agglomeration:

1. Economies of scale in production: For many industries, the average cost of producing goods declines as the scale of production expands. This can make it very profitable to concentrate production in a few large facilities and to locate those facilities close to lots of workers, namely near cities.

2. Economies of scale in trade and transportation: Delivery costs are lower when the trucks, planes, and ships going to and from transit hubs are fully loaded with goods. Filling trucks, planes, and ships is easier when they’re moving between urban areas with large ports, airports, and distribution centers.

3. Falling transportation and communication costs: Falling transport costs allow firms to exploit economies of scale, producing in one place and distributing to a large and geographically diverse market by road, air, or sea. Similarly, declining communications costs allow firms to concentrate productive activity in one place and distribute services to a wider market via airwaves, radio frequencies, and fiber optic cables.

4. The need for proximity with other firms in the same industry: Face to face interaction is important in industries where creativity, inspiration, imagination, or the cultivation of trust are key inputs. Proximity with other firms also lowers recruitment and training costs since a firm will have ready access to workers with industry-relevant skills.

5. The advantage of diversity: For firms, such as ad agencies, that need a workforce with a diverse skill set, will be better able to find and recruit workers from many different speciallized backgrounds if they locate near large cities where many different industries cluster.

6. The quest for the center: Firms that need direct access to customers will naturally locate in the geographic center of their markets. In many cases, this will mean locating in or near big cities. Polèse points to the example of Broadway. The concentration of performing arts in New York reflects access to the large local population but also theatergoers from other metropolitan areas that are linked to New York by rail, air, and road.

7. Buzz and bright lights: Cities with amenities like food, nightlife, museums, recreation, culture, and shopping tend to attract more people. Economists Ed Glaeser, Jed Kolko, and Albert Saiz find that high amenity cities grow faster than low amenity cities. They also observe that urban rents rise faster than urban wages, suggesting that people want to live in cities for reasons beyond rising wages. Even as information technology makes it possible for an increasing number of people to work from nearly anywhere in the world, the amenities associated with city life continue to attract and retain urban residents.

Why are Arabic streets so narrow?

...asks Tyler Cowen. He isn't convinced by Chris Wickham's answer: 

"the Arab states did not use processions as a major part of their political legitimization; the assembly in the mosque courtyard was sufficient for that. The need for wide boulevards ended" 

Ryszard Kapuscinski in "The Shadow of the Sun" inadvertently offers an alternative hypothesis: 

"...one enters the narrow streets typical of old Arab towns. I cannot say why these people built in such a cramped and crowded fashion, why they pressed together this way, practically one atop another. Was it so that they would never have far to walk? Or to be better able to defend the town? I don't know. But one thing is certain: this mass of piled stone, this accretion of walls, this layering of balconies, recesses, eaves, and rooftops, somehow secured, as though in an icy treasury, a corner of shade, a tiny breeze, and a bit of coolness during the most terrifying noontime heat." 

Maybe Arab streets are designed for this bit of coolness?

Update: Philip Blue also weighs in.

Great ideas

A couple of interesting ideas I came across last night - Alan Beattie, the FT's trade editor was talking on Development Drums, and one point in particular stood out. He puts the blame for the thousand year stagnation of the Middle East not with Islam but with the Mongol invasions, which instituted a dictatorial top-down style of leadership, a style which subsequent Islamic leaders stuck to and twisted Islam to fit. Beattie argues that the test of this hypothesis would be a Christian country also invaded by the Mongols, and that this country exists - Russia. I'm not quite sure that this standard of evidence would get you into a top economics journal, but it's an intriguing idea.

Secondly, Paul Romer, one of the inventors of modern growth theory, argues in this lecture (via the Economic Principals Blog) that the answer to China's thousand year long stagnation was institutional experimentation. Specifically, he argues that it was Hong Kong, with its cutting edge (British) institutions and governance, that motivated China to experiment with its own "special economic zones" along the coast, successes which led to further liberalisation, and ultimately the greatest ever anti-poverty programme.

Which finally leads me to Romer's proposal, which is that just like in competitive markets, competition between countries about rules and institutions needs to allow for new entry to be truly effective. We need to be able to experiment with new institutional forms, including the idea of foreign countries or groups of countries running a city-state in a poor country.

Part of this argument involves a discussion of space, which is where do we put all of these new urban city-states, when we can expect 5-8 billion people to be moving to cities over the medium-long term. He then shows a slide of Africa at night - empty.

Which is almost the same as what Abhijeet has been saying for months, the solution to all of Southern Sudan/Africa's problems is importing Indians. Voila!