Sunday, May 25, 2008

Income Per Natural

An interesting new paper by Michael Clemens and Lant Pritchett has produced the new and I think quite valuable statistic of average income per natural. This stat measures the average income of all those who were born in a country rather than those who live in the country - So, not the average income of residents of Ireland or France but the average income of an Irishman or a Frenchman. It includes those who were born by no longer live in the country and does not include immigrants.

The country with the highest income per natural is the United States. So, human capital from the United States is the most valuable in the world. Does this score some points for the much maligned U.S. educational system? Well, actually I think it reflects the great post-secondary educational system in the United States - which in turn is due to the fact that the college level, the U.S. educational system is actually extremely competitive.

Luxembourg shoots ahead of the United States in income per resident because of the wealthy who are able to establish residency there. But Luxembourg types aside, I would argue that the reason the United States in not number one in income per resident is tremendous amount of poorer immigrants that move to the United States. This is not a bad thing; it’s better for immigrants and most native born Americans. However, it does distort stats for healthcare and inequality, which strengthen the arguments of some policy makers with bad ideas. Income per natural should remind us that the United States is probably the best country in the world to be born… Economically at least.

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