As I spend my vacations back home in Argentina, I am being asked by many people what do I think about the Argentinean economy? My answer to most of these people was that, on top of what the newspapers say, it is very hard to comment. Data is necessary to properly evaluate the state of an economy. And reliable data on my country's situation is hard to get.
A lot has been said about the inflation index in Argentina. The figure published by the INDEC, the national statistics agency, has been accused by almost every media source as unreliable. The government is accused of cherry picking the stores and goods it follows such that inflation is reported to be low. But every Argentinean you meet on the streets will tell you the index is a lie. They go to the supermarket or any store and they can "estimate" the index on their own heads. And things do not add up to what is published. MIT's billion dollar project includes an index where they follow a - albeit smaller - selection of goods online and report on them. This MIT inflation index is not perfect and probably would not exist if people trusted the official inflation. The orange line in Figure 1 shows their index, while the blue one is official inflation. Clearly, the official one is usually below half of the one built from online prices.
Figure 1: Argentina's official versus independent inflation indices.
Figure 2: Argentina's life cycle of income (monthly), 2012.
This will not come as a surprise to any Argentinean. They all know they cannot trust the official inflation index. However, I am always surprised to notice that do not comment on the reliability of other reports. It is relatively easy for everyone in the street to partially check the inflation index while going to the supermarket. But it is absolutely impossible for a regular person on the street to check if GDP has grown. If the government or the statistics agency is willing to lie on inflation - which we can all easily check - imagine what they can be doing with reports on things like GDP, unemployment, reserves or government spending/revenue - which are very hard to measure.
What can we do about it? Probably not much. But in order to try to reduce some of these issues I decided to look at the micro data available. The Encuesta Permanente de Hogares is a regular household survey (also held by the INDEC) where people are asked several questions on their education and economic status among others. My hope was that looking at something that is not directly published from this, maybe I can extract some more reliable information. I am not certain about this but here we go.
Looking at the life cycle of income the pattern found is surprinsingly similar to that of the US in the 1970s. (Are we really 40 years behind?) Using the EPH for 2012, the shape observed is very similar. The peak is observed around the age 40, a lot earlier than currently in the US, but similar to them in the 1970s. But the level of income is shockingly low, with an average monthly income at the peak age of below 4000 Argentinean pesos (between 300 and 500 dollars, depending on the dollar exchange rate used). Similar calculations for 1995 give a similar shape but an average monthly income at the peak of twice as much, around 900 dollars.
Going from the average, at the peak age, of say 500 dollars a month to the published value of GDP per capita of over 14 thousand dollars seems a bit complicated to me (12 months x 500 = 6000 dollars a year, which is a lot less than 14 thousand...). Remember that the average of 500 dollars was based on people who have jobs. Unemployed people were not included. The sample is small and results may not be very accurate due to that. But even then, you still need to add all the people who are not working but still count for the "per capita" part of those 14 thousand dollars. This is the issue with Argentinean data nowadays. We cannot trust them and is hard to find out if we researchers are making a mistake in our calculations or if things simply just do not add up.
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