Jim Kim's complicated relationship with economic growth

Bill Easterly's shop at NYU gives some amazing quotes from Jim Yong Kim.

 Here's lo mas contundente:

 Conclusion: Pessimism of the Intellect, Optimism of the Will, By Joyce V. Millen, Alec Irwin, and Jim Yong Kim


 “Through a series of specific cases, we have demonstrated how growth – the market-led economic growth sought by governments, the growth in profits celebrated by businesses, and the growth in power and influence of transnational financial and corporate interests – often comes at the expense of the disenfranchised and vulnerable… As the imperatives of growth at any cost increasingly determine economic and social policy and the behavior of global corporations, more people join the ranks of the poor and greater numbers suffer and die.” (p. 363)

So the presumptive new head of the WB believes that market led economic growth is causing MORE people to become poor and MORE people to die!

 YIKES!!

 So North Korea  >> South Korea?

 Mao  >>  Deng?

Houston, we have a problem.

Degrees of freedom

In my seminar on Growth & Development today we discussed a paper where the sample size was fairly small, around 75 observations. The authors said due to the small sample size, they couldn't estimate models with a lot of regressors in them because of degrees of freedom issues.

Then they proceeded to investigate upwards of 30 variables, by using them one at a time! To "save" degrees of freedom!

Yikes!

First off, excluding relevant variables in the analysis biases results unless the variables are somehow orthogonal to each other, which is EXTREMELY unlikely.

Second, estimating 30 small regressions on the same sample does not actually save ANY degrees of freedom over estimating one big regression on the sample.

Sure you can say it does and use the nominal critical values in each case, but you are kidding yourself and misleading your readers.

Degrees of freedom are like cigarettes. Once you use them, they are gone. They can't be re-used over and over again.

Overall the paper reported well over 100 estimated coefficients. On 75 data points. In a ton of different regressions all with the same dependent variable. Used the nominal critical values in every case.

What is the critical value for a "t-stat" with negative 34 degrees of freedom?

Anyone?

Bueller?

Cheer up Greece, your "lost decade" is almost half-way over

Latin America has been a great laboratory for studying sovereign debt crises.

In the 1980s, the borrowing countries got pushed around by the lenders (big US banks), agreements were brokered and quickly broken, significant debt relief took a VERY long time to happen.

The countries were strung along with new loans and conditions until the banks had written down those loans to the point where debt relief was feasible for their balance sheets. The countries suffered the proverbial "lost decade" of economic misery.

In 2001, Argentina took another path. They broke their link to the dollar and defaulted on their debts.
After a very steep but short lived economic implosion, the Argentine economy came roaring back. Argentina has since worked to deal with the creditors they burned, and is in no way, internationally isolated.

Greece has chosen to follow the first path. They have been strung along with new loans, new conditions and demands. Their economy is entering its 5th year of recession. And it appears that Germany and France now think their banks can withstand either significant debt write-downs or even a Greek default at this point.

The only question is whether Greece will get real debt relief to go along with all the conditions or whether the EU will just kick Greece off the bus by demanding conditions so stringent that the Greeks will finally say "no mas".

In my view, Greece has been making the wrong choices all along the way. Even at this late date, with the promise of significant debt relief in front of them, it would be better for Greece to get kicked off the bus than to take the deal.

I say that because the deal will continue to crush the Greek economy, and the best case debt scenario arising from it is a 120% debt to GDP ratio in another 10 years or so (i.e. it still won't solve Greece's problem).

It would have been better for Greece to default and devalue 3 or 4 years ago. Their economy would be growing now and they could start making amends and getting back into international capital markets. However, even at this late date, I believe the Argentina option is still better for Greece than continuing to eat Germany's sandwich.

serial double dippers

Ah Peru, is there anything you won't do? Fresh on the heels electing Alan Garcia (perhaps the worst ex-president who got to return to his country ever!) in 2005, comes word that the front-runner in this year's presidential election is Alejandro Toledo??

Really! I am not making this up.

The latest poll results have Toledo leading the field at 30.7%. Yes, this is the same Toledo who left office in 05 with a single digit approval rating despite solid economic growth rates.

The Peruvians are a wily bunch though. If Toledo falters (and how can he not?), they still have Keiko Fujimori, daughter of jailed ex-strongman Alberto in the race, currently polling at 20.3%, waiting in the wings.