Fatih Özatay, PhD - [Archive]

Per capita incomes revisited 19/02/2011 - Viewed 1311 times

Over the last three decades Turkey did not make as much progress as Korea and Ireland in terms of per capita income by purchasing power parity.

I am keeping the promise I gave in my previous commentary. First a small reminder for those who are not familiar with the subject: It is needed to make some arrangements to compare the level of income in different countries. The aim is to calculate the income of countries in a way to reveal the 'purchasing' power implied by a certain level of income. The income derived as a result of this calculation is called 'income at purchasing power parity'. I will call this the 'corrected income'.

I have already provided similar data before. The reason why I promised to revisit this subject is as follows: When dealing with the economic and social indicators for Tunisia and Egypt, I also referred to those for Turkey. Among these indicators was corrected income and the data suggested that corrected income in Tunisia was higher than that in Turkey. It did not make much sense to me. But the source I referred to (Penn World Tables). I had talked about per capita income in Turkey based on that database. The problem was far beyond the Tunisia-Turkey comparison; it was about the accuracy of the comments I have previously made at this column. Therefore, I needed to refer to different databases to check.

Oddness in 2009 data

Similar corrected income data are also published by the IMF, the World Bank and the United Nations Development Program (UNDP). The World Bank data is quite close to the IMF data. But the data for 2009 is a bit odd. For instance, the data suggests that while the economy shrank by 4.7% per capita income increased substantially. So I will leave the World Bank data out of comparison.

I will deal with the corrected income of each country as a ratio to the USA's per capita income. I will refer both to historical development and comparison of income in Ireland and Korea, two countries which managed to reduce the income gap with developed countries, with that in Turkey. I will settle with stressing only the following points:

The gap is still large

The above mentioned databases draw a more favorable outlook for Turkey than Penn World Tables. Turkey's per capita income stands at 28 percent as a ratio to USA's, compared to 17.8 percent derived in Penn World Tables.

But this is the only difference with my previous comments. The unfavorable aspects as highlighted in the other commentary are unfortunately still valid: first, there still exists a large gap between Turkey and the USA (the result does not change if you compare Turkey with Germany or Japan, either). Second, per capita income in Turkey improved only by five points compared to the USA in the last three decades. Therefore, the comment 'we made no progress' still applies. Third, there are countries who achieved what Turkey failed to do: In the examined period Korea and Ireland have made substantial progress.

This commentary was published in Radikal daily on 19.02.2011