March 22, 2007


Bigger than thought: An underestimated pay-off from economic reform (The Economist, 3/22/07)

WHEN it comes to economic growth, Brazil has long been seen as something of a laggard. But it turns out that the country's economy in 2005 was 10.9% bigger than previously thought and has grown since 2000 at an annual average rate of 3%, rather than 2.6%. That still lags the world (see chart) but is a bit more respectable. [...]

There are other reasons to think that Brazil is better off than generally realised. In a recent paper*, two IMF economists argue that official data "grossly underestimate" the growth of household income. Brazil's economic opening in the early 1990s lowered prices and improved the quality and availability of goods, changes that were largely missed by the consumer-price index. Using data about what people actually consumed, the economists estimate that income per head grew 4½% a year between 1987 and 2002 compared with the official figure of 1½%, with the poor benefiting most. That makes Brazil look better; it makes economic reform look better, too.

Posted by Orrin Judd at March 22, 2007 5:09 PM
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