Reddit Economics Network

If a country's GDP is growing at x% and the inflation in that country is y%, then did they actually grow only (x-y)%.

For example,

India GDP growth rate 2023 - 7.2% India Inflation - 5.69%

Real Growth - (7.2-5.69) = 1.51%

Is this the right way to look at things?

So my country Afghanistan receive weekly aid from UN which means that our currency value is kept up high artificially. This has resulted in our currency to be overvalued compare to Iran and Pakistan. As such, products from those countries are cheaper than Afghan products and have flooded Afghanistan markets.

This means cheaper products to be available for the general people and it’s good. But I talked with few afghan industrialist and they said that at this rate Afghanistan factories will have to close down due to the prices and they wanted tariffs to rise.

So I understand both sides but I’m not sure. I read that US had very high tariffs when it industrialized. Same with many other countries to protect their industries until they are strong and competitive enough.

Recently, the FTC caused a stir by banning most noncompete agreements. A number of business groups have since come out of the woodwork to warn us of all the awful things that will happen to the US economy if we ban noncompetes.

However, California banned noncompetes in 2008 — and even before then, their application within the state was severely limited. You know, California — the state that accounts for nearly 15% of the entire US economy. The very same California that is known throughout the world as a bastion of technological innovation. Nothing worthwhile has ever come out of California, right?

I'm not really trying to make a case for or against noncompetes (although you can probably tell which side I'm on). But what surprises me is how nobody is talking about this natural experiment in what happens when you ban non-competes. Seems to be completely absent from the conversation, and I don't understand why.

I got into an economics program at a school that is under an arts degree. I was wondering if an economics degree can have a 6 figure+ salary? (100k+)

Over the last 10 years, the only productivity increase in the fast food industry I can think of are kiosks for ordering digitally. The price of meat can fluctuate but wages generally trend up, especially in recent years. Is cost disease the main reason for fast food’s expensiveness? Does this extend to the entire restaurant industry?

Cities like Cleveland and Pittsburgh have become models for some revitalization by having healthcare take over as the primary employer. In many small to mid-sized Rust Belt cities hospitals or local healthcare companies have become the top employer or the highest paying in the area. How did this transition happen? Is it due to how expensive, and thus lucrative healthcare is in America? Is it due to the stain on health outcomes left by heavy industry? How have cities without universities been able to attract talent or gain an adequate workforce?

I don't know if this is an appropriate subreddit for this, but it was a question that I have always wondered, especially with marketing tactic awareness. I want to hear what r/askeconomics has to say

I'm not from the economics area and really want to know what people think of the video. I tried to write down more or less the arguments presented and wanted to share with you to have your opinion on them. Economist explains why you can't afford a house anymore - YouTube

The author, Dr. Dr. Joeri Schasfoort says:

1. presentes the theories of "Construction failure", "excessive speculation" and "financialization of housing", wich, according to him, should present a solid explanation to the increase of housing costs in most countries.
2. Basic concepts: housing is not a good like others. It is at the same time a consumption good and an investment good.
3. House as a consumption good and "Construction failure": Over the value of houses should thend to get lower, but if it "was just a consumption good, then the economic forces that determine it's price should be a really simple function of how many people there are and how many houses are built". According to the first theory - "Construction failure" - not enough houses have been built, wich makes it's prices rise.

3.1) If this theory is thruth, what evidences should we see? At 3:48 a graphic is presented showing that the new houses built in USA, Canada and New Zeland is more or less stable, since 1977. But on the demand side it's "pretty much impossible to find out precisely how many houses are needed by a changing population", but the population has largely increased in the three mentioned countries, specially in Canada and Australia. So, in these countries, if you analyse the house per person built, there's been a downwards trend. According to another graph presented (4:24), in 1977, it was about 100 ; in 2023 it was <75 (I still am not sure wath the graphs mean, tbh). There are some problems with using just this index: we don't know how long housed lasted during the period, and the ammount of population doesn't necessarily translate to the need of houses because "people tendo to live in smaller houses in these countries" (4:55) and people have moved more from countryside to cities and rural houses have become "useless because no one wants to live there anymore" (5:12).

3.2) So, why more houses were not built? NIMBYs - Not In My BackYard: A significant amount of peoeple, while in favor of new housing, are against doing so in their neighbourhoods. "The housing market is suffering from what is called a 'Collective action problem'" (6:17). Actions from people, while rational from a individual perspective, in the collective point of view create scarcity of habitation. He points that economists like Noah Smith fight against the blockage of new construction by the so called NIMBYs as a way to get out of the construction crisis. This, according the Jori, has happened in Auckland/NZ (6:55) a city wich "upzoned" 3/4 of the city allowing for low density terrains to be replaced by high density multistore buildings wich led the rent to income ratio to drop, most notably since 2020, while the rest of the country followed a opposite trend.

3.3) Problems with such theory: if this was the only explanation, then vacant houses in more affordable places should also be used, but he presents a graph showing the opposite (8:26). SImilarly, in China, while housing if more and more expensive, there are a lot of vacant units (around 7,2 million homes).

4. Housing as an investment: could explain situation in China and, for example, Ireland, Spain, USA (early 2000s). Since everyone needs to live somewhere, a high in price doesn't affect demand so hard. The "economics of housing as a speculative investment works a bit differently (...) a specualtor wants to win money with money" (11:00). For such investors, a high in the housing marking would make it more attractive, pouring more money in the market. Usually a speculative bubble goings in pair with a boom in construction, "however, given the positive feedback (...) even this increased supply is not enough to keep up with demand" (11:47). Sometimes, prices rise so fast investors don't even rent a vacant house.

4.1) According to Dr. Jori, we could teste the claim that houses are becoming more expensive due to "excessive speculation" but looking at vacant houses - but this only works by looking at areas where the prices are increasing or already too high (for example: if you look at a country with a population decline, the number of vacant houses will also increase).

5. House financialization: money is too cheap right now. (Vide works of Dr. Josh Ryan Collins from U. C. London). This all started in the 80s when politians wanted to make house more accecible and "liberalize mortgage markets" (13:52). By looking at a graph of home ownership rates (13:57), Jori questions this claim, but Dr. Josh Ryan says "since the majority of mortgage loans finance(d) the purchase of exiting rather than new property, the inevitable result is house price inflation" (14:01). Basically, you're just reating debt without increasing much of new houses. Countries liek Korea and Germany didn't experience this, because they didn't give such low rates incentives.

6. FMI claims houses are mor affordable today. Rates have gone down since the 80s - in the US they are around 7%, compared to around 19% in the 80s. at 17:36 he gives an example of a $100k studio apartment: today it would cost (at 7% rates) around $660 per month; in the 80s it would be around $1500 per month. In conclusion: prices are higher, but rates are lower. However focusing only on mortgage prices is a problem, for three reasons: A) it implicitly assumes anyone can get a mortgage, wich is not the same for the most vulnerable part of society; B) the presented graph is a mix of 40 countries so it looks at countries like Korea and USA (that have very different markets) with the same lens; C) Since the 2020s rates have gone high and housing affordability (BIS and IMF grapf at 19:12) has gone down in the last years.

7. Conclusion: Dr. Jori says that most countries don't have a housing bubble the NIMBYs seem to present a bigger problem for restriction of offer of housing in most countries.

Apparently I don't understand economics at all because I find myself asking 'so what' to these points from a Wall Street Journal commentary, regarding the consequences of the ECB cutting rates before the US:

Stronger dollar/weaker euro: If the ECB cuts first, that could weaken the euro. Comparatively lower European rates reduce the euro's appeal versus the dollar.

Lower bond yields: European and U.K. government bond prices would get a boost from early ECB rate cuts, according to HSBC. That means lower yields, which move inversely to prices.

Higher inflation?: A weaker euro would make imports more expensive for the currency bloc and could involve inflation pressure. That is one reason ECB policymakers will likely be wary of diverging too far from the Fed.

I can understand how each point comes to be, but I'm not seeing the real implications and why it's so weird/risky that actually makes it so ECB won't want to be too different from the US.

1. Obviously if EU has a lower rate than the US, money will go towards the higher yielding USD. This will make EUR weak, making imports expensive (I'm guessing most EU countries depend heavily on imports, but necessarily from US? I don't know). Expensive imports bring inflation up again, so it kind of makes the rate cuts, i.e. anti-inflation, pointless. Fair enough. Is that the only factor at play though?

2. Bond prices go up. This one I don't get. I don't know who is the main holder of ECB bonds but I don't see this being a negative consequence of ECB-Fed divergence.

3. See #1.

tldr: why would it be bad if the ECB cuts before the Fed

I know the general idea that Colonisation is bad but I wanted to get a real sense of how bad the British rule in India was. I saw an estimate by Utsa Patnaik that Britain got over $45 trillion but the methodology in my opinion looked too sketchy. Further I read that Bengal Famine was caused more by local Indians than the British admin but again many call the Historian behind the claim (Tirthankar Roy) to be apologist. Further even when British left India it was the 10th largest in world by GDP if I am not wrong. I get a general feeling that while Britain did exploit a lot, a large share was taken by the local zamindars, rulers and so on.

Basically I wanted to know what the real picture is and if possible some good sources that answer this question. On a scale of 1-10; 10 being the worst how bad was the British rule in India.

I’m doing my bachelors degree in mechanical engineering which I chose because of a combination of subjects that I like, a passion that is aeronautics and the broad job market plus comfortable salaries for the long run.

But my other big academic passion is social science, including obviously economics. From all the social sciences is the one which I like the most to consider doing seriously because I enjoy the mix of having math and social courses. The thing I would love the most about doing economics is the chance of working in the public sector. From what I’ve learned from it, it’s something that has a deep personal meaning for me.

Ideally I’d rather finish my degree in Mechanical Engineering and later pursue a masters in economics. My main problem is that I like both areas a lot. And this issue has been really stressful and tough to think through. I hope someone could please help me to do the two things that I enjoy the most in a realistic and sustainable way. Thank you

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This will be long.

In the 1890s, Argentina was the richest country in the world based on GDP per capita. However, their economy was based mainly on export and they didn’t/couldn’t industrialize. Thus, their economy stagnated, and the rest of the developed world left Argentina in the dust. But even then, in the 1960s, Argentina was still so rich that its GDP per capita was similar to Western Europe in that time. But Argentina was still economically stagnant and these days their GDP per capita has remained similar to how it was decades ago and now the rest of the developed world (America, Britain, etc) is so far ahead of Argentina that Argentina is classified as ‘developing’ these days. So Argentina isn’t even considered developed anymore.

For Japan, they were one of the richest countries in the world GDP per capita based in the 1990s, but they too are now in stagnation since then and the rest of the developed world has since surpassed them GDP per capita (America, Germany, Australia, etc). But Japan was so rich in the 1990s that even if they are stagnant they are still one of the richest countries in the world. But their economy, put simply, just does not grow. Their economy 29 years ago was 5.5 trillion, and in 2024 it is merely 4.1 trillion.

Is Japan heading on the path like Argentina where they regress from developed to developing, not because Japan or Argentina are “worse” than before but rather because the rest of the world improved so much, that Japan will no longer be considered ‘develoepd’ as many developing countries maybe start to match its GDP per capita?

Cuz it’s not like Argentina is poor for instance. They have high levels of literacy, free college and healthcare, incredible infrastructure, etc. You can tell it’s HDI is high, it’s just that compared to the developed world (America, Canada) Argentina didn’t grow at a rate anywhere near as good they did so in comparison to America and Canada, Argentina has very little money/GDP per capita. Argentina has the lifestyle peope in America and Canada have, but because their economy didn’t grow at the same rate, they have much much less disposable income.

Is Japan going down this route? It feels like Japan is the same as Argentina, but exactly 100 years later (1890s vs 1990s). The Japanese Yen is getting weaker like how the Argentine Peso got weaker as well.

When you hear inflation discussed, you hear that is is “stubborn” like a wild animal, and when you hear how inflation comes down it is said it is “tamed” or that it’s “back was broken”. What’s with the strange choice of words when talking about this aspect of economics specifically?

I know this is not really economics, but I figure that if this popular theory was true, it would somehow appear in data and that economists would know how to find it.

Is it just that law training requires more time and money on the part of the member?

Because of COVID......3% inflation is now the new "2%" inflation.

Covid changed things forever such as:

• office jobs working from home/hybrid schedule
• inflation

I dont understand why nobody in our society wants to awnser the big elephant in the room....
....which is 2% is basically impossible in TODAY'S economy.

Is quantity supplied of labor equal to quantity demanded of labor when the economy is experiencing full employment? If so, then how? Wouldn't there still be frictionally and structurally unemployed people who are looking for jobs (and should therefore be included as part of quantity supplied, correct?)? I was thinking that quantity supplied would be greater than quantity demanded.

Hi all. I’m reading through “A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data” by Battese and Coelli (1995) in preparation for using Coelli’s Frontier 4.1 software to practice runnning Stochastic frontier models myself (you can find the paper for free on ResearchGate).

Quick summary of the paper: Battese and Coelli look at some rice paddy farmers in India, and model a production function for them (modelling what inputs contribute to overall value output for the farmers, measured in rupees). They then want to ask, hey, how well are these farmers combining their inputs? Are some farmers combining inputs better than others (we’d say the better farmers have greater technical efficiency)? So they construct a function for inefficiency, which allows them to imagine a ‘frontier’ representing the best combination of inputs to outputs in the sample, and then finding how far each Farmer sits away from this frontier by looking at their inefficiency (Finding their inefficiency score, and then subtracting it from the frontier). Key ideas: constructing a production function, constructing an inefficiency function.

Question 1: Could someone run me through why we need to model the inefficiency effects as stochastic in order to construct a frontier?

To my understanding, when we say a model is stochastic, we’re adding in a term that captures the effects of ‘white noise’ or ‘random effects’ on the dependent variable. This is different to a simple error term, which we say captures the effects of the variables we were unable to include in our model. In a stochastic model we split up that error term into a portion that captures the white noise/random effects (stochastic, denoted by the term V) and a portion that captures the effects of the variables representing inefficiency effects (Denoted by the term U), for a (simplified) production function Y = exp(x*β + V - U). We can then drill down into U (the inefficiency function), specifying it as U = z*δ + W, where the zs represent variables we believe contribute towards technical inefficiency, δ is their coefficient (much like β is the coefficiency of the input variables in the production function), and W is a random variable. I’m not fully grokking what W is doing, nor what it would mean for the inefficiency effects to be ‘non-stochastic’ (which is a test Battese and Coelli do and reject i.e. finding that the inefficiency effects ARE stochastic). If the inefficiency effects were non-stochastic, how would this scupper our model?

Question 2: How to interpret the ‘exp’ term in the production function Y = exp(x*β + V - U)

Bit of a more basic question I hope, I’m not sure how to read the ’exp’ in the above! Does it imply that Y = e^[x*β + V - U]? That doesn’t seem super intuitive to me, given we transform the production function later in the paper by taking the natural log of both sides to end up with ln(Y) = β0 + β1*ln(Land) + β2*ln(Irrigated land) + β3*ln(labour) ….. + V - U.

Thanks in advance for taking the time to engage, I’ve been so enjoying digging into technical efficiency for the first time.

Gender Pay Gap

I know that the “ Gender Pay Gap” is trending right now. I know that it is not as simple as “Oh one gender gets paid more than the other” I know that all factors must be considered when actually calculating the “Gender Pay Gap” I know that specifically in Australia there are laws for equal pay for equal jobs. I know that professional sports pay is directly collated against revenue of the sport itself.

What I don’t understand is the inequality in Gender Retirement Age, one gender’s legislated retirement age is 64 and the other is 66! If the government was to provide equality of outcome shouldn’t they equalise the retirement age regardless of gender. Which would also equalise to some degree in removing the discrimination against one specific gender over the other for retirement age eligibility?

The government and politicians who apparently represent “the people - their constituents” must be bought to task in this discrimination and inequality and equalise the retirement age in Australia regardless of gender!

Hello I want to research about different economic development ideas. I'm open to all articles, books, or any different sources.

I know that deflation is bad and what central banks have been working towards is disinflation without causing a recession. However, if the rapid increase in inflation during the pandemic was largely due to supply chain disruptions, why haven't prices returned to somewhere in-between?

Like if a case of soda was $8 previously and jumped to $14, why couldn't it come back to say $10-12? I understand that prices will not go back to where they used to be, but shouldn't they return to where they would have been with normal inflation had supply chains not been interrupted?

I understand it a bit but…context.

I clock in at 2:58pm 5 days a week. I clock out at 11:36pm every night. Minus 30 minute lunch daily, that comes out to 8 hours 8 minutes of worked time daily, or 40hours 40mins weekly. Employer rounds 2:58 to 3 (-2 minutes for me) , and rounds 11:36 to 11 (-6 minutes for me). Weekly, I’d be missing out on 8x5 = 40 minutes of overtime.

Does the 7 minute rounding rule work rounding both up when you’re early and down when you’re staying late? Let’s say I’m in Pa and my employer rounds to the quarter hour 0/15/30/45. Also, not entirely sure if this is the correct sub.

I have a question and I thought this sub might be a good place to go for thoughts.

I think the pandemic showed us how much of an issue it can be to have your health insurance and various benefits tied to your job, since sudden mass lay offs = tons of folks scrambling for insurance and/or a lot of folks left uninsured. But I also understand somewhat of how history got us to employers offering various benefits.

My question is why do part time employees almost never get offered benefits?

Obviously it's cheaper to not, and I know some places just hire a bunch of part time folks so they don't have to offer benefits. Benefits cost a lot. But what makes one full time employee so much more valuable to a company than two part time employees? Is the reduced cost of training one person vs training two people that much of a price difference? I'm sure there are other factors at play that I'm unaware of.

I also assume a lot of the folks working part time are probably more likely be single parents, disabled people, etc and it seems like those are folks who deserve benefits too, although I know that's not something society / companies care about.

I make enough money where I should be investing some of it. But the thought of just buying some ETF from Vanguard (common advice from financial experts I know) makes me so uneasy. It's just numbers on a screen. Why is everyone so sure it's a no brainer? Not saying I wont invest, but it just doesn't seem 'real' if that makes any sense.

Suppose that a multinational mining corporation invests money to construct a lithium mine in a poor, developing nation with large mineral deposits but no currently existing infrastructure with which to extract and process it.

The company invests in the mine and begins to extract lithium ore, exporting it overseas where it is refined for an electronics company, bringing a lot of revenue to that mining company. The company hires a small number of local workers for a very low wage- a wage which results in a poor living standard.

Because of the lithium production and export, this country's GDP will grow, since GDP is the total value of all goods and services produced in a country's economy. The lithium being mined and exported for a profit is a good being produced inside of that country, so its value will get added to the GDP.

However, all the profits are kept by the mining company and are repatriated back to the country where the company is headquartered. Neither the country nor the locals have a stake in it, so the only party making money off this deal is the multinational.

If I'm not wrong, while the GDP has increased, the living standards of the people in this country haven't necessarily grown.

How has the investment in this lithium mine increased the locals' real wages, healthcare access, sanitation, literacy, infrastructure quality, etc?

I’m in a discussion with my friend about the current divestment movement at U.S. universities and I’m curious about the long term consequences for the defense industry.