Angus Deaton

A Nobel Prize–winning economist tells the remarkable story of how the world has grown healthier, wealthier, but also more unequal over the past two and half centuries The world is a better place than it used to be. People are healthier, wealthier, and live longer. Yet the escapes from destitution by so many has left gaping inequalities between people and nations. In The Great Escape, Nobel Prize–winning economist Angus Deaton—one of the foremost experts on economic development and on poverty—tells the remarkable story of how, beginning 250 years ago, some parts of the world experienced sustained progress, opening up gaps and setting the stage for today's disproportionately unequal world. Deaton takes an in-depth look at the historical and ongoing patterns behind the health and wealth of nations, and addresses what needs to be done to help those left behind. Deaton describes vast innovations and wrenching setbacks: the successes of antibiotics, pest control, vaccinations, and clean water on the one hand, and disastrous famines and the HIV/AIDS epidemic on the other. He examines the United States, a nation that has prospered but is today experiencing slower growth and increasing inequality. He also considers how economic growth in India and China has improved the lives of more than a billion people. Deaton argues that international aid has been ineffective and even harmful. He suggests alternative efforts—including reforming incentives to drug companies and lifting trade restrictions—that will allow the developing world to bring about its own Great Escape. Demonstrating how changes in health and living standards have transformed our lives, The Great Escape is a powerful guide to addressing the well-being of all nations.

Health, Wealth, and the Origins of Inequality

The Great Escape

Anne Case

While the rise in premature deaths among American working-class whites has become a national crisis, the authors tie the problem to the weakening position of labor, the growing power of corporations, and to a health-care sector that redistributes working-class wages to the wealthy

Deaths of Despair and the Future of Capitalism

Büyük Firar; Saglik, Varlik ve Esitsizligin Kökenleri

Heute sind die Menschen gesünder, wohlhabender und sie leben länger als früher. Einem Teil der Menschheit ist »Der Große Ausbruch« aus Armut, Not, Krankheit und Entbehrung in Freiheit, Bildung, Demokratie und eine freie globale Weltwirtschaft gelungen. Dennoch nimmt die Ungleichheit zwischen Nationen und Menschen unaufhaltsam zu. Das Opus Magnum des Nobelpreisträgers beschreibt, wie Lebens- und Gesundheitsstandards sich weltweit erhöhen ließen, wenn Aufrichtigkeit und neue Fairness Einzug in die globale Weltwirtschaft hielten. Aus dem »Wohlstand der Nationen« könnte ein Wohlstand aller Nationen werden. Angus Deaton, der Träger des Wirtschaftsnobelpreises 2015, schildert die Geschichte der Weltwirtschaft überraschend neu und anders. Vor 250 Jahren bescherte die Industrielle Revolution Westeuropa und den USA nachhaltigen Aufschwung und wirtschaftlicher Fortschritt, der bis heute andauert. Viele Menschen in Großbritannien, Frankreich, den USA und Deutschland überwanden ihre Armut, eigneten sich Bildung an und gestalteten ihre Staaten freiheitlich und demokratisch um. Aber bereits damals öffnete sich die Kluft zwischen Reich und Arm. Erhellend und eindringlich entwirft der Ökonom ein Panorama überwältigender Entdeckungen und phantastischer Erfindungen: Von der Überwindung von Pest, Cholera und Epidemien, von den Errungenschaften wie Impfungen, Antibiotika, Hygiene, sauberem Trinkwasser und den Erfolgen der modernen Medizin und Technik. Dennoch holen schmerzhafte Rückschläge auch die modernen Gesellschaften – vor allem aber die Ärmsten – immer wieder ein: entsetzliche Hungersnöte, Naturkatastrophen, Drogenhandel, Krebserkrankungen und die AIDS/HIV-Epidemie auf der anderen Seite. Alternativen bieten Reformen: Die Entwicklungs- und Protektionspolitik des Westens sollte eingestellt, jedenfalls grundlegend verändert werden. Dringend müssten die Handelshemmnisse aufgehoben werden, um der ganzen globalisierten Welt ihren eigenen „Großen Ausbruch“ zu eröffnen. Unser Wohlstand ist anfällig; Umdenken und anders Handeln sind dringend erforderlich. Hatten die USA noch vor 20 Jahren einen bis dahin nie gekannten Wohlstand für viele Amerikaner erreicht, wächst das einstige Vorbild der westlichen Welt heute wirtschaftlich schleppend oder gar nicht. Die Ungleichheit unter den Amerikanern hat schlagartig zugenommen. Hingegen hat sich das Wirtschaftswachstum in Indien und China vervielfacht und das Leben von mehr als zwei Milliarden Menschen unvorstellbar verbessert. »Dieses Thema bedarf einer großen Leinwand und eines kühnen Pinselstrichs, und Angus Deaton liefert auf virtuose Weise beides.« The Economist

Von Armut und Wohlstand der Nationen

Der große Ausbruch

From the Nobel Prize–winning economist and New York Times bestselling coauthor of Deaths of Despair and the Future of Capitalism, candid reflections on the economist’s craft When economist Angus Deaton immigrated to the United States from Britain in the early 1980s, he was awed by America’s strengths and shocked by the extraordinary gaps he witnessed between people. Economics in America explains in clear terms how the field of economics addresses the most pressing issues of our time—from poverty, retirement, and the minimum wage to the ravages of the nation’s uniquely disastrous health care system—and narrates Deaton’s account of his experiences as a naturalized US citizen and academic economist. Deaton is witty and pulls no punches. In this incisive, candid, and funny book, he describes the everyday lives of working economists, recounting the triumphs as well as the disasters, and tells the inside story of the Nobel Prize in economics and the journey that led him to Stockholm to receive one. He discusses the ongoing tensions between economics and politics—and the extent to which economics has any content beyond the political prejudices of economists—and reflects on whether economists bear at least some responsibility for the growing despair and rising populism in America. Blending rare personal insights with illuminating perspectives on the social challenges that confront us today, Deaton offers a disarmingly frank critique of his own profession while shining a light on his adopted country’s policy accomplishments and failures.

An Immigrant Economist Explores the Land of Inequality

Economics in America

Christina H. Paxson

Abstract: This paper examines issues of household saving, growth. and aging in Taiwan. The Taiwanese patterns of high income growth, declines in fertility, and increases in life expectancy all have implications for life-cycle saving. We use data from fifteen consecutive household income and expenditure surveys. from 1976 to 1990, to examine whether observed profiles of consumption and saving are consistent with life-cycle theory. The patterns of consumption and saving across households of different ages and cohorts appear to be broadly consistent with a life-cycle model. However. the data also indicate that household consumption tracks income closely. and this evidence casts doubt on simple life-cycle theory.

Saving, Growth, and Aging in Taiwan

Franque Grimard

Pakistan, like many LDCs, derives most of government revenue from indirect taxation. However, the system of taxes and subsidies has grown up piecemeal over the years. Previous exercises in price reform for Pakistan have been forced to make very restrictive assumptions about consumer preferences, and have typically used demand systems that prejudge what are the desirable directions of price reform. In this paper, the methodology of Deaton (1988, 1991) is extended and applied to the 1984-85 Household Income and Expenditure Survey. A theory of quality variation based on separable preferences is developed, and the implications for welfare and empirical analysis laid out. The prices of oils and fats and of sugar do not vary very much in the survey data, and the symmetry and homogeneity restrictions from the theory play an important part in obtaining sharp estimates of own and cross-price elasticities. The parameter estimates suggest that there are significant cross-price elasticities between the high-calorie foods and the presence of these substitution patterns means that the effects of potential price reforms are quite different from those that would be estimated using the traditional assumptions. Based on demand patterns alone, it would be desirable to raise government revenue by raising the consumer price of rice. However, in Pakistan it is not generally possible to decouple the producer and consumer prices of rice.

Demand Analysis and Tax Reform in Pakistan

Extensions and Indonesian Results

Price Elasticities from Survey Data

The First Simon Kuznets Memorial Lecture

Household Behavior in Developing Countries

Orley Ashenfelter

Gary Solon

This Working Paper reviews a number of aspects of the collection and use of panel data from households in developing countries. Sampling issues are discussed in Section 1. The authors conclude that there are likely to be real, if modest, benefits from incorporating some panel element into household survey data collection in developing countries. The recognition that panel data are likely to be subject to substantial errors of measurement does not invalidate this conclusion. Section 2 discusses the measurement of income dynamics, an issue that cannot be addressed without panel data. Recent research using U.S. data is reviewed to show that comparable work for developing countries would add an important dimension to discussions of poverty, inequality, and development. It is in the third area of review, that of econometric analysis, that the real benefits of panel data appear most fragile. While it is true that panel data offer the unique ability to deal with the contamination of econometric relationships by unobservable fixed effects, the presence of measurement error can compromise the quality of the estimates to the point where it is unclear whether cross-section or panel estimators are superior.

Does it Make Sense?

Collecting Panel Data in Developing Countries

Alan W. Heston

PPP-based national accounts have become an important part of the database for macroeconomists, development economists, and economic historians. Frequently used global data come from the Penn World Table (PWT) and the World Bank's World Development Indicators; a substantial fraction of the world is also covered in the PPP accounts produced by the OECD and the European Union. This paper provides an overview of how these data are constructed, and discusses both the theory and the practical problems of implementing it. All of these data are underpinned by the International Comparison Program (ICP), which collects data on prices worldwide. The most recent round of the ICP was for 2005 with final results published in early 2008; version 7.0 of the Penn World Table will soon incorporate these results. The 2005 ICP, like earlier rounds, involved substantial revisions to previous data, most notably revising downwards the size of the Chinese (40 percent smaller) and Indian (36 percent) economies. We discuss the reasons for the revisions, and assess their plausibility. We focus on four important areas: how to handle international differences in quality, the treatment of urban and rural areas of large countries such as China, India, and Brazil, how to estimate prices for government services, health, and education, and the effects of the regional structure of the ICP. All of these affect the interpretation of previous data, as well as the current revisions. We discuss previous revisions of the PWT, and their effects on various kinds of econometric analysis. The paper concludes with health warnings that should be kept in mind when using these data, which are not always suitable for the purposes to which they are put. Some international comparisons are close to impossible, even in theory, and in others, the practical difficulties make comparison exceedingly hazardous.

Understanding Purchasing Power Parities and Purchasing Power Parity-based National Accounts

Darryl R. Holden

A Comment on Deaton

The Estimation of Systems of Demand Equations

Ronald Ian Miller

This study examines the experience of sub-Saharan Africa in dealing with the variability and difficulty of forecasting commodity prices and asks whether the region's much-criticized financial policies are a response to the price fluctuations or to internal political and fiscal arrangements. It reviews the pan-African econometric evidence regarding the effects of international commodity-price fluctuations on output and considers the effects of these fluctuations on the political survival of African leaders. It examines the economics and political economy of taxation and government expenditure in the context of African exporters of primary commodities and discusses arguments that African fiscal and political arrangements compromise the countries' abilities to react to external shocks. The study weighs the relative value of case studies and generalized econometric models in determining the economic effects of commodity-price variations and concludes that it is appropriate to use case studies as a vehicle to generate hypotheses about the causes and consequences of policymaking in Africa, but that the econometric evidence is useful in testing those generalizations when data can be pooled from many countries.

International Commodity Prices, Macroeconomic Performance, and Politics in Sub-Saharan Africa

What is inequality in health? Are economists' standard tools for measuring income inequality relevant or useful for measuring it? Does income protect health and does income inequality endanger it? I discuss two different concepts of health inequality and relate each of them to the literature on the inequality in income. I propose a model in which each individual's health is related to his or her status within a reference group as measured by income relative to the group mean. Income inequality, whether within groups or between them, has no effect on average health. Even so, the slope of the relationship between health and income, the gradient, ' depends on the ratio of between- to within-group inequality. The model is extended to allow income inequality to play a direct role in determining health status. Empirical evidence on cross-country income inequality and life-expectancy within the OECD, and on time series for the U.S., Britain, and Japan, provides little support for the idea that inequality is a health hazard at the national level. Birth cohorts in the US between 1981 and 1993 show no relationship between mortality and income inequality. However, there is a well-defined health gradient in these data, and its slope increases with cohort income inequality

Inequalities in Income and Inequalities in Health

Poverty counts are counts of individuals in poverty but are calculated from household or family data on income or expenditure. The transition from one to the other requires assumptions about intrahousehold allocation, about differences in needs across different people, and about the extent of economies of scale. The number of elderly in poverty, or the number of children in poverty, is sensitive to these assumptions and to differences in living arrangements across age groups. We explore the sensitivity of poverty counts to variations in assumptions about child costs and economies of scale using data from the United States and from six large Indian states. Because living arrangements of the elderly are so different in the United States and India, the use of the latter forces us to think about household structure and poverty in the United States. We argue that the official poverty counts in the United States are compromised by unrealistically high costs of children and by unrealistically high economies of scale. We provide a discussion of how economies of scale and child costs can be estimated from the data, using identifying assumptions that label private goods and adult goods, and we make calculations based on the 1990 Consumer Expenditure Survey. We obtain plausible estimates of child costs, together with a number of interesting but hard-to-explain anomalies when we try to estimate economies of scale.

Measuring Poverty Among the Elderly

The Microeconomics and Macroeconomics of the Permanent Income Hypothesis

Salman Zaidi

In September 2001, staff from the World Bank and the International Monetary Fund met with the objective of strengthening collaboration between the two organizations in projects of civil service reform. This strengthened collaboration will have key benefits in ensuring consistency between the conflicting goals of the two organizations, establishing realistic objectives within the reform process, and maintaining a core set of wage and employment data. The principal conclusion arrived at was that World Bank and IMF staff should be engaging in collaboration earlier in the reform process. To guide the collaboration, six foundations were identified. These include: develop a medium-term fiscal framework; foster national ownership by making reforms politically feasible; focus and streamline conditionality; agree on sequencing and timing of reforms; and strengthen data collection. These principals will be tested for effectiveness in several focus countries.

Guidelines for Constructing Consumption Aggregates for Welfare Analysis

Valerie Kozel

This book brings together the key papers in the Indian poverty debate, together with a new introduction that provides an overview and synthesis. The collection also contains some seminal papers that link the current debates to the earlier literature, as w

The Great Indian Poverty Debate

Standard methods of measuring poverty assume that an individual is poor if he or she lives in a family whose income or consumption lies below an appropriate poverty line. Such methods provide only limited insight into male and female poverty separately. Nevertheless, there are reasons why household resources are linked to the gender composition of the household: women's earnings are often lower than men's; families in some countries control their fertility through differential stopping rules; and women live longer than men. It is also possible to link family expenditure patterns to the gender composition of the household, something Case and Deaton illustrate using data from India and South Africa. Such a procedure provides useful information on who gets what, but cannot tell us how total resources are allocated between males and females. More can be gleaned from data on consumption by individual household members, and for many goods, collecting such information is good survey practice in any case. Even so, it will be some time before such information can be used routinely to produce estimates of poverty by gender. A more promising approach is likely to come within a broader definition of poverty that includes health (and possibly education) as well as income. The authors discuss recent work on collecting self-reported measures of nonfatal health and argue that such measures are already useful for assessing the relative health status of males and females. The evidence is consistent with non-elderly women generally having poorer health than non-elderly men. The authors emphasize the importance of simultaneously measuring poverty in multiple dimensions. The different components of well-being are correlated, and it is misleading to look at any one in isolation from the others. This paper--a product of Gender and Development, Poverty Reduction and Economic Management Network--is part of a larger effort in the network to understand the gender dimension and public policy.

Consumption, Health, Gender, and Poverty

I explore the connection between income inequality and health in both poor and rich countries. I discuss a range of mechanisms, including nonlinear income effects, credit restrictions, nutritional traps, public goods provision, and relative deprivation. I review the evidence on the effects of income inequality on the rate of decline of mortality over time, on geographical pattens of mortality, and on individual-level mortality. Much of the literature needs to be treated skeptically, if only because of the low quality of much of the data on income inequality. Although there are many puzzles that remain, I conclude that there is no direct link from income inequality to ill-health; individuals are no more likely to die if they live in more unequal places. The raw correlations that are sometimes found are likely the result of factors other than income inequality, some of which are intimately linked to broader notions of inequality and unfairness. That income inequality itself is not a health risk does not deny the importance for health of other inequalities, nor of the social environment. Whether income redistribution can improve population health does not depend on a direct effect of income inequality and remains an open question.

Angus Deaton

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