Friday, December 21, 2012

Books read recently

Ranked from * to ***:

  1. Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb (***)
  2. A Long Way Down by Nick Hornby (**)
  3. Arguably: Essays by Christopher Hitchens by Christopher Hitchens (**)
  4. Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (P.S.) by Steven D. Levitt and Stephen J. Dubner (**)
  5. The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz (***)
  6. Numbers Rule Your World: The Hidden Influence of Probabilities and Statistics on Everything You Do by Kaiser Fung (**)
  7. Deception: The Untold Story of East-West Espionage Today by Edward Lucas (***)
  8. Parkinson's Law by C. Northcote Parkinson (*)
  9. Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed--and What to Do About It (Kauffman Foundation Series on Innovation and Entrepreneurship) byJoshua Lerner (**)
  10. Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland (***)

Doing Business 2013: Poland in the Global Top 10

On December 19, I gave a presentation on the World Bank's "Doing Business 2013: Poland in the Global Top 10" as part of the TIGER Seminar Series.

I explained how Poland became the global No. 1 in improving the business environment last year. Quite an achievement! I am proud to have played a role in it.

Click for more on the Doing Business ranking and Poland's performance.

Saturday, December 1, 2012

My article in "Gazeta Wyborcza" on Doing Business

Gazeta Wyborcza, a leading Polish daily newspaper, published an article co-authored by me on how to further improve Polish ranking in the World Bank's Doing Business report.

This comes after Poland was classified in the No. 1 place among the fastest reformers globally in Doing Business 2013, catapulting Poland into a 55th place overall.

I bet that Poland will soon enter the top 50, and will end up in the top 30 within the next couple of years. I will be happy to have contributed to this achievement.

Tuesday, November 27, 2012

Workshop on technology transfer in Tel Aviv

I have just come back from an EU-Israel workshop on technology transfer, which took place in Tel Aviv on November 25-26 (starting at 8.30am on Sunday!).

I spoke on the Polish experience with using 10 billion euro of the EU and Polish public funds to support enterprise innovation in Poland, based on a World Bank report, which I co-authored and which will be published in December.

Following the workshop, one of the participants, Prof. Shlomo Maital from MIT and Technion, wrote a very nice note on his blog on "Poland's Economy Excels", which seems to have been at least partly inspired by my presentation. Delighted to see some positive PR for Poland!

Saturday, November 24, 2012

Minimum wage doesn't destroy jobs!

What a change!

In one of most revisionist texts on economics yet, the Economist argues that minimum wages do not necessarily destroy jobs based on a number of studies for the US and the UK. It goes on to say that "today the consensus is that Britain’s minimum wage has done little or no harm".

Most surprisingly, there is evidence that in the UK the minimum wage "not only pushed up pay for the bottom 5% of workers, but it also seems to have boosted earnings further up the income scale—and thus reduced wage inequality". Wow!

The article concludes by saying that:

"This new evidence leaves economists with lots of unanswered questions. What exactly is going on in labour markets if minimum wages do not hurt employment but reduce wage gaps? Are firms cutting costs by squeezing wages elsewhere? Are they improving the productivity of the lowest-wage workers? Some of the newest studies suggest firms employ a variety of strategies to deal with a higher minimum wage, from modestly raising prices to saving money from lower turnover.

Policymakers face practical issues. Bastions of orthodoxy, such as the OECD, a rich-country think-tank, and the International Monetary Fund, now assert that a moderate minimum wage probably does not do much harm and may do some good. Their definition of moderate is 30-40% of the median wage. Britain’s experience suggests it might even be a bit higher. The success of the Low Pay Commission points to the importance of technocrats rather than politicians setting wage floors. Britain’s small, regular changes may be easier for firms to absorb than America’s infrequent but hefty minimum-wage increases. Whatever their flaws, minimum wages are here to stay."

Background papers are here:

"Minimum wage channels of adjustment", by Barry T. Hirsch, Bruce E. Kaufman and Tetyana Zelenska, IZA Discussion Paper No 6132, November 2011
"Minimum wages and wage inequality: Some theory and an application to the UK", by Tim Butcher, Richard Dickens and Alan Manning, October 2012
"Why has the British national minimum wage had little or no impact on employment?", by David Metcalf, CEP Discussion Paper No 781, April 2007
"Minimum wage effects across state borders: estimates using contiguous counties", by Arindrajit Dube, T. William Lester and Michael Reich, The Review of Economics and Statistics, November 2010
"Minimum wage: Maximum impact", by Alan Manning, Resolution Foundation, April 2012
"Revising the minimum wage-employment debate: Throwing out the baby with the bathwater?", by David Neumark, J.M. Ian Salas and William Wascher, forthcoming
"Do minimum wages really reduce teen employment? Accounting for heterogeneity and selectivity in state panel data", by Sylvia A. Allegretto, Arindrajit Dube and Michael Reich, Industrial Relations, April 2011

Wednesday, August 8, 2012

Recently read books

Finally, I managed to put down the list of what I have been reading recently, as always ranked from * (don't touch it) to *** (can't live without):

  1. Finance and the Good Society by Robert J. Shiller (**)
  2. The Cambridge Economic History of Modern Europe: Volume 2 by Stephen Broadberry (Author), Kevin H. O'Rourke (**)
  3. How Much is Enough?: Money and the Good Life by Robert Skidelsky and Edward Skidelsky (***)
  4. Imagine: How Creativity Works by Jonah Lehrer (*)
  5. Being Wrong: Adventures in the Margin of Error by Kathryn Schulz (***)
  6. Eastern Front 1914-1917 by Norman Stone (**)
  7. Thinking, Fast and Slow by Daniel Kahneman
  8. Iron Kingdom: The Rise and Downfall of Prussia, 1600-1947 by Christopher M. Clark (***)
  9. Strategic Vision: America and the Crisis of Global Power by Zbigniew Brzezinski (**)
  10. End This Depression Now! by Paul Krugman (**)
  11. "Gottland" by Mariusz Szczygiel (**)
  12. "Zbig. Człowiek, który podminował Kreml" by Andrzej Lubowski (**)
  13. Breakout Nations: In Pursuit of the Next Economic Miracles by Ruchir Sharma
  14. Happiness: Lessons from a New Science by Richard Layard (***)
  15. Decades of Crisis: Central and Eastern Europe before World War II by  T. Iván Berend (***)

Saturday, July 21, 2012

Shame on the Economist! It is so wrong on Poland

The current edition of the Economist features an article on "Dream on?", which is unprofessional, misleading and wrong on basic facts about Poland.

First, it says that "In Poland, for example, credit to the private sector grew by an extraordinary 36.6% in 2008, contributing to a current-account deficit of almost 9% of GDP." This is manipulation, because it talks about growth from a level of private credit that it much lower than anywhere else among peers and thus much less worrisome (Poland's private credit to GDP ratio is one of the lowest in the whole EU, close to Romania only; it is much different to worry about fast credit growth in an economy with credit much exceeding 100% of GDP, like in most of the EU, than in Poland, with 60% of GDP or so).

Second, thee current account deficit in 2008 was only 6.6% of GDP, according to the IMF, not almost 9% of GDP (where did they get the data from???).

Third, it argues that "In recent months, the FDI and portfolio capital Poland required to fill this [current account gap] gap has flowed in the wrong direction. That leaves the country uncomfortably "susceptible" to the euro crisis, says Raffaella Tenconi of Bank of America Merrill Lynch, if it prompts a further withdrawal of cross-border lending", which is another manipulation since the data are taken out of context and are for only of couple of months of the year (exactly when dividends are paid to foreign owners of Polish companies, which biases the data, rather than for the usual whole year). For the whole year, the IMF projects a current account deficit of 4.4% of GDP only, largely financed by FDI and EU inflows. I don't know who Raffaella Tenconi from BoFA is, but she doesn't really know what she is talking about (or she has a short position on the zloty and wants to finance her early retirement....). As to her claim that Poland is susceptible to the euro crisis, while true in general (which country in Europe isn't?), is wrong in detail as Poland is one of the least, not the most susceptible economies in the EU to the euro zone further troubles. If fact, as I have argued before, the euro zone crisis is a blessing for Poland, since, inter alia, it keeps the zloty exchange rate so low, that Poland is Europe's China in terms of price competitiviness. The banking sector, which Tenconi implicitly argues would be the major channel of contagion, is well capitalized, profitable, and largely funded by domestic deposits making withdrawals of foreign financing less relevant (the two largest banks, PKO BP and PEKAO SA, have loan-to-deposit ratios below 100, meaning that all their loans are financed by domestic deposits, not foreign borrowing)

Finally, it is a shame that the Economist continues to classify Poland as an emerging market, putting it in the same basket as China, Russia ot Turkey. Poland, with GDP per capita PPP of US$20,000, three times the level of China, is not an emerging market anymore. The World Bank and the OECD now officially classify Poland as a developed economy, not an emerging market. According to the IMF, Poland's GDP per capita will exceed that of Portugal and Greece in the next couple of years - perhaps we should call these countries "emerging" (even if for now they are rather "submerging" to be exact) too? Time for the Economist to grow up.

Thursday, April 26, 2012

Poland richer than Portugal!

The new Golden Age of Poland and New Europe is coming fast...

According to the new data from the IMF's World Economic Outlook (Spring 2012), GDP per capita PPP in Poland will exceed that of Portugal by 2015 (given the downside risks to growth in Portugal, probably even sooner), which will likely be the first time in Poland's more than 1000 year old history when Poles will become richer than the Portuguese.

By 2017, Poles will be almost as rich as Greeks (although the IMF is probably too optimistic on Greece here..) and Saudi Arabs (except that Poland has no oil... with shale gas, if the predicted bonanza proves to be real, we will be richer than Saudi sheiks even sooner).

I was right then back in 2009, at the bottom of the crisis, when I published a paper on "The Coming Golden Age of New Europe". I now hope to finish the book on it soon too. Stay tuned!

Friday, April 6, 2012

My quote in the Economist's article on Poland

This week's edition of the Economist features an insightful article on "Poland's progress. Tusk takes two".

I am quoted as saying that "growth this year could exceed 2.5%, reckons Marcin Piatkowski, a World Bank economist in Warsaw. He says Poland’s potential for productivity gains could make it the “Asian tiger of Europe”.

My earlier quotes are here:

Tuesday, February 28, 2012

Prosperity without growth?

I have recently read a thought-provoking book on "Prosperity Without Growth: Economics for a Finite Planet" (Earthscan, 2009) by Tim Jackson.

Now I found that the book is based on a report, which is available online here, for free. Its summary is below:

"Our economy is geared, above all, to achieving growth. In times of recession especially, economic policy is all about returning to growth. But a financial crisis can also be an opportunity for some basic rethinking about what the economy is for, and how through some fundamental restructuring of our financial system we can safeguard our economic stability in the future, as well as achieving wider social and environmental benefits.

In recent years, other objectives such as sustainability and wellbeing have moved up the political agenda. Over two years, the SDC's Redefining Prosperity project looked into the connections and conflicts between sustainability, wellbeing and growth. Following a series of seminars and commissioned thinkpieces, we published the report Prosperity without Growth? The transition to a low carbon economy, written by Professor Tim Jackson, the SDC's Economics Commissioner.

Prosperity without Growth? analyses the complex relationships between growth, environmental crises and social recession. In the last quarter of a century, as the global economy has doubled in size, increases in consumption have caused the degradation of an estimated 60% of the world's ecosystems. The benefits of growth have been distributed unevenly, with a fifth of the world's population sharing just 2% of global income. Even in developed countries, huge gaps in wealth and well-being remain between rich and poor.

Our report proposes a twelve step route to a sustainable economy, and argues for a redefinition of "prosperity" in light of our evidence on what really contributes to people’s wellbeing.

Tuesday, January 3, 2012

Taxes on the rich and economic growth

A very interesting paper on "Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities" by Piketty et al. argues that:

"There is a strong correlation between cuts in top tax rates and increases in top 1% income shares since 1975, implying that the overall elasticity is large. But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model. This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity. Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed."

which in plain English means that (i) cuts in personal taxes in the past thirty years have led to higher income inequality without accelerating economic growth and that (ii) higher personal taxes might not necessarily stymie growth.

Controversial, no?