“Imaginary Europe” outperforms Europe

Since Josh did an empirical study, I thought I might as well follow-up with one of my own.

A popular question in the blogosphere these days is “Europe vs. United States“. This discussion arises from the healthcare debate, and whether it’s better to live in countries with superb social services or a country with less of a safety net and more competition (hey, that’s us!). Mankiw observes that GDP (PPP) is higher in the U.S. than in many EU countries. Tyler Cowen wondered today what an imaginary Europe would look like:

It would be an interesting exercise to construct an “imaginary Europe,” so instead of the current gdp of Italy you would sub in the output of a comparable number of Italian-Americans, and so on.  The Swedish-Americans in Minnesota get subbed in for the Swedes in Sweden, and so on.  I’ve never seen that done but I would like to know the answer, both with respect to per capita income and social indicators.

I acknowledge the many shortcomings of making judgments from an “imaginary Europe” exercise. For one, immigrants may historically represent the cream of the crop of a country in terms of courage and work ethic. It was the brave, intrepid Irishman who escaped to the United States during the famine, and earned enough money to send back for his family. Immigrants also represent a brain drain and may come with advanced degrees and skills.

But without anything better to do during my lunch hour, I thought I’d give it a try. I got my data from two places. First, I used this Wikipedia article to get 2009 GDP (PPP) per capita, as calculated by the International Monetary Fund. This is a measure of per capita purchasing power, so it’s adjusted for the relative strength of currencies. I also used this website, which gives income (as a percent difference from the US per capita GDP) by ethnicity as reported to the General Social Survey conducted by the National Opinion Research Center. In this case, I’m not “subbing in” productivity, merely comparing per capita GDP of ethnic groups in the U.S. and in the ethnic homeland.

I’ll note two flaws with this analysis right off the bat. One is that I was too lazy to find median per capita income in the U.S. (if someone finds that for me, I’ll update it). Although the other countries are also average per capita income, one could argue that there’s greater inequality in the U.S. Second, there are sample size issues, but I couldn’t find better ethnicity data. For that reason, I left off Switzerland (only 7 respondents).

The results are unsurprising if you saw Mankiw’s post today. In all but two cases, immigrants in the United States performed better than their European native counterparts. The high U.S. per capita GDP would suggest that even if you didn’t believe my data, immigrants would have to vastly underperform compared to the median in order to fare worse than Continentals.

You can see my data spreadsheet here: http://spreadsheets.google.com/pub?key=tvDdw0_d0xGhfpehUJiVAhQ&output=html

—update—

Here’s a pretty interesting social indicator, actually: life expectancy by ethnicity. It looks like Asian-Americans have a higher life expectancy at birth in the United States than in Singapore. In Singapore, which has a universal healthcare system (and a smaller and more dense population which facilitates access to healthcare), the life expectancy is 81.9 yrs for females. According to the PLoS article, life expectancy in 2001 for Asian American females was 86.7 (and probably higher in 2009)!! That’s even higher than world-leader Japan (86.1 yrs in 2009). Keep in mind that “Asian American” in the U.S. encompasses a far broader group of ethnic groups (including Pacific islanders) and therefore U.S. advantage may be even greater than these number reflect.

I haven’t taken the time to closely look at it yet, but check out Figure 1, showing life expectancy by county. I bet that there are several counties in the Dakotas and Minnesota that are 90% Scandinavian in ancestry and outperform Norway/Sweden in life expectancy.

–update2–

A much better execution of the “imaginary Europe” exercise here, with similar results.

Advertisements

2 thoughts on ““Imaginary Europe” outperforms Europe

  1. Hey David, this is really interesting. I need to look at your numbers more and think about it more, but still, I’m impressed at the work you’ve put into this. So, if you had to give a provisional thesis, what would it be?

    On the link you included to ethnicity incomes, all I think is, “Aww, look at the Jews outperforming all other groups, with +29%…”

  2. Thanks for reading and commenting Allison. It’s a big pet peeve of mine how much people use statistics for comparative purposes without normalization. A popular argument for universal healthcare is that the U.S. spends more % of GDP on healthcare yet citizens in socialized medicine countries (Switzerland, Singapore, Japan) live longer (full disclosure: I’ve used this argument myself). Similarly, the U.S. has a smaller tax burden compared to Sweden or France, which are used in those countries to finance an extensive social safety net; liberals would say that Europe is not hurt economically by higher tax rates, and conservatives would say that higher taxes reduce economic productivity. A common critique is that these statistics are not adjusted to reflect our large, heterogenous population and the U.S.’s larger land area.

    The “imaginary Europe” exercise seeks to compare apples to apples and Swedes to Swedes. The data suggests that for an ethnic group with a comparable culture, work ethic, genetic background, etc., America’s array of taxes and services is better than Europe’s in terms of economic output. The social indicator data suggests that for ethnic groups with a similar genetic profile, disease proclivity, dietary habits, etc. the American healthcare system, and overall environment, can’t be said to be doing worse than universal healthcare elsewhere. Of course perhaps they could be living even longer in the U.S. if we had better healthcare, and perhaps we’d make even more money with a higher taxes! We don’t know, but we can’t just say “well Europe is doing so well and has higher taxes” to prove why the economy wouldn’t suffer from higher taxes in the U.S.

    I guess the take-away is it’s important not to get too carried away by limited social science data sets because of the huge amount of variables and difficulty in controlling for them, and to keep in mind the lack of normalization when people cite the points from the first paragraph. It may be that we should still have universal (and at the least more efficient) healthcare and our economy won’t suffer from higher taxes, but the proponents of those should be using more and better arguments.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s