Archive for the ‘economics’ Category

Modeling Immigration

March 10, 2008

Could a partial differential equation like the diffusion equation be considered as a model equation for predicting immigration/emigration rates?
The diffusion equation, after assumptions and simplifications, can be derived from the Boltzmann transport equation, which describes the time evolution of a distribution function. The time dependent diffusion equation can be written as:

d (phi)/dt = div (D grad(phi)) + S
where, D = diffusion coefficient, phi = property to be modeled (Temperature, Electric Potential) and S = sources/sinks.

The flux (J) can be expressed as D grad(phi) .

Immigration/Emigration mainly depends on the disparities in the per-capita GDP and the health of an economy of the immigrant and emigrant country. So an ideal candidate for ‘phi’ in an immigrant model would be the per-capita income.
The phase-space would be the different regions (states, countries or continents) under consideration.

Determining the diffusion coefficient (let’s call it the immigrant coefficient)
The immigrant coefficient could be a function of

  • immigrant region’s immigration/employment policies (liberal vs strict, caps on immigration)
  • sectorial (agriculture, industry, services) distribution of the GDP. An agriculture and industry based economy would employ more people compared with a services-based economy. On the other hand, a services based economy would have a higher demand for educated immigrants.
  • exchange rates between the immigrant and emigrant countries.
  • age distributions
  • unemployment rates, inflation
  • existing immigrant populations

A Curve fitting/regression analysis could be done to fit the immigration rates of the previous years to estimate contributions from each factor. Events which led to any big migration e.g. second world war probably need to be excluded from the regression analysis. A bigger challenge would be determining the multi-immigrant coefficient (a generic coefficient for a single country wrt all countries).

Sources/sinks (time-dependent)

  • investments (private & public)
  • expenditure on military, health-care, social-security etc.

Needless to say, such a model would be too simplistic, but perhaps a good starting point. But what would be the use of such a model? Financial institutions such as the world bank or the IMF could look at how an investment would affect the immigration/emigration rates.

…time to do a literature survey and brush up my matlab skills.

India’s 60th budget

March 9, 2008

On Feb 29th, Palaniappan Chidambaram, India’s finance minister, delivered his seventh budget becoming the second Finance minister to deliver a fifth straight budget after Manmohan Singh, India’s current prime minister. The 2008-2009 budget marks the 60th anniversary of the Budget of independent India.The 1947 Budget is regarded as an interim Budget.

The highlight of the budget was a loan waiver of Rs 500bn ($12.5bn) to small and marginal farmers and Rs100bn ($2.3bn) debt settlement scheme for other farmers. Note that, agriculture employs about 60% of the labor force and accounts for about 20% of the GDP. Recent years have seen an alarming increase in the number of Indian farmers killing themselves. The crop failures (due to drought and pests) and the developed nations’ high subsidies are the main causes of the current plight of the farmers.

Indian as well as foreign media accused the FM of delivering a populist budget to help the Congress party in the coming elections. The Economist argued that the waiver would not help those who really need it. The big farmers would not qualify for the scheme and the small farmers are mainly in debt to the moneylenders.
Economist Article – India’s budget – Write-offs as high as an elephant’s eye

Vir Sanghvi in his weekly column CounterPoint argues otherwise.
Counterpoint: The Budget & the Farmer

He states that in a complex economy like India, the government has to intervene when the free market principles fail to equitably distribute the wealth and that SEZs also violate the free market economics. He counters claims of loans not helping those in need by mentioning that 58 per cent of rural indebtedness is to banks and institution.