Poor in a rich country or rich in a poor country?
Dani Rodrik says it is much better to be poor in a rich country than it is to be rich in a poor country (top and bottom deciles, that is, for “rich” and “poor”):
The correct answer is that a poor person in a rich country is three times better off than a rich person in a poor country (given my definition of what “rich” and “poor” mean in this context). It is not even close.
The relevant numbers are below (in 2004 PPP-adjusted dollars). The reason we are tempted to answer “rich in a poor country” is the obvious wealth at the very top of the income distribution. But by the time you average the entire top 10%, the income level goes down quite a bit.
I think this is a deeply flawed way of looking at this issue. A commenter asked whether Rodrik would himself prefer to be poor in a rich country. To me, the answer is no contest: Hands down, you are much better off being in the top 10% in a poor country than in the bottom 10% in a rich country. The analysis above is way too simplistic, and even the numbers are disputable (from sampling errors to use of income concept).
To caricature this a wee bit:
Being in the top decile of a poor country likely means you have a good job, some level of status, opportunities for advancement and travel, education, better health and on and on. Being poor in a rich country (excepting students in transition, etc) is equivalent to a crappy job, no control over your circumstances, no opportunities for advancement or to live the type of life you find valuable, no education, poor health.
An important element missing is wealth. In most poor countries the richest decile in terms of assets controls upwards of 90% of the total. In rich countries the bottom decile has zero, if not negative, net assets.
Would you really choose to be in the bottom decile in the US than in the top decile in Nicaragua?
UPDATE: Rodrik nails me with a sobering thought:
Marc, Nicaragua is poor. I think we’d all agree. But it is not near the bottom decile in PPP terms.
And it doesn’t matter whether you calculate by listing countries or counting population, the bottom decile pretty much only includes sub-Saharan Africa countries plus maybe Afghanistan/NKorea and minus South Africa.
These are not cushy countries to live in. Only the true elite (Delong’s upper .1%) is not actively looking for better opportunities abroad.
I was pretty sure that Nicaragua was down there (it is, at least, one of the poorest in the Americas) but I’ll take Rodrik’s word for it. In the poor countries I have been to (in Latin America and Asia), it is still no contest: better to be in the top decile there. If my choices are Sub-Saharan Africa, North Korea and Afghanistan, then maybe being anywhere in the distribution is not a pleasant choice.
But then neither is being in the bottom 10% in the US — this one might just be a roll of the dice. If the choice is being in the bottom decile in Norway, Sweden, Japan or Canada, then poor in a rich country that is not war-torn, repressed and that has opportunities for a good life is clearly a better proposition.
So it seems to me that there are other attributes that are more important and that might more than compensate for differences in GDP on a PPP basis. We cannot answer the question without knowing the specific country options.
While I agree in premise that the ‘rich’ in a poor country are better off than the ‘poor’ in a rich country, I answer the “where would you prefer to live” question differently. I would rather be a poor person in Canada than a rich person in a poor country. Perhaps that is because of the opportunity, or just the familiarity, but it might be something more too.