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April 11, 2017

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One could argue that the correct comparison is not Puerto Rico vs. Costa Rica but Puerto Rico vs. the US mainland.

But that wasn't the question.

Puerto Rico, while much poorer than the USA, has a similar standard of living to poorer countries in Western Europe like Portugal while Costa Rica has a standard of living more like an average Latin American country. However given rapid Tico growth and likely Puerto Rican stagnation totally possible to have catch-up by 2040 say.

https://fred.stlouisfed.org/graph/?g=dkFn

Oh, sure!

Although I'd note that Portugal isn't really independent in the sense that Costa Rica is independent; it looks more like Puerto Rico than you might think. Net federal transfers have historically run around 8% of Puerto Rico's GDP; net European Union transfers to Portugal have run about 3%. So while not quite the United States, the E.U. has played a similar role in Portuguese development.

Obviously that doesn't mean that the ticos can't catch-up; other small countries have done so. Panama appears to be in the course of doing so, albeit with eye-popping inequality. I̶n̶ ̶2̶0̶1̶2̶,̶ ̶t̶h̶e̶ ̶m̶e̶d̶i̶a̶n̶ ̶h̶o̶u̶s̶e̶h̶o̶l̶d̶ ̶i̶n̶c̶o̶m̶e̶ ̶i̶n̶ ̶P̶a̶n̶a̶m̶a̶ ̶w̶a̶s̶ ̶$̶1̶3̶,̶7̶1̶6̶ ̶p̶e̶r̶ ̶y̶e̶a̶r̶,̶ ̶n̶o̶t̶ ̶t̶o̶o̶ ̶f̶a̶r̶ ̶o̶f̶f̶ ̶P̶u̶e̶r̶t̶o̶ ̶R̶i̶c̶o̶'̶s̶. Whoops -- apparently the Panamanians use "medio" to mean "promedio." The average income for the middle quintile (≈ median) was $9,138 in 2012. See page 13 here.

I would, however, be reluctant to predict that Puerto Rican stagnation will last until 2040. I'm reluctant to predict anything that far out! I would have been fine with such projections around 1990, but right now I'm not prepared to reject the hypothesis that automation and artificial intelligence is going to blow large and unpredictable holes in all our growth and convergence models over the next quarter-century. (I may just be future shocked, or the robots may indeed be about to destroy our social system.)

Wait, where did I mention Costa Rica?


Doug M.

Also, this may be of interest:

https://medium.com/migration-issues/how-the-long-recession-is-changing-puerto-rican-migration-e0e5ddf29b03

(linking is not advocacy; I disagree with Lyman Stone about a lot of stuff. I like the way he munches numbers, though.)

Doug M.

-- If you don't want to read the whole thing, teal deer: PR's population peaked in the years 1996-2010 at around 3.7 to 3.8 million. It has fallen fast since then, with the current population being around 3.4 million: around a 10% loss over a decade. That looks more like Eastern Europe than anything the Caribbean has ever seen before.

Based on reasonable projections, it should continue to fall for some time to come. An optimistic projection would be around 3.2 million in 2040, and a pessimistic projection would be more like 2.4 million. (The main driver is of course emigration, and emigration that's disproportionately by young people in their peak fertility years. However, low rates of immigration, falling TFRs, and stagnant or rising death rates are all playing a part.)

The crisis going on for a generation doesn't actually seem insane to me, absent some bold action on someone's part.

The discussion was in one of the old email threads: you pointed out that the GDPC of both places was similar. The discussion was really about Guam, which is waaaaay more prosperous than it would be outside the United States. (Or, likely, inside anywhere else.)

The generational crisis possibility sounds plausible. Still, let's run with Portugal. It seems to pulling out without any debt write-downs, which P.R. still seems likely to get. Why would we expect P.R. to follow Greece rather than Portugal? Portugal, after all, had a recent emigration history than Greece lacked. (Relatively.)

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