Sometimes it's better to split the baby

This story about the Census Bureau is amazing to me: The Census is changing its annual survey about health insurance.  As a result, the new data will not be comparable to the old, making it much harder to gauge the effects of the Affordable Care Act.

Is this a White House conspiracy to hide the effects of the law, as some have suggested?  Maybe, but probably not. I have a lot of respect for the government data producers, so I am giving them the benefit of the doubt.

Yet I don't see why the Bureau needs to make such a sudden change.  Why not, for a few years, give half the sample the old questionnaire and half the new one?  This procedure would provide a basis for eventually splicing together the old and new time series.

Philippine Tax Authority TKOs Manny Pacquiao

Why are tax authorities always hate figures? The Good Book portrayed them as untouchables, and tax collectors have had something of an image problem since biblical times. While the entire Philippine nation was cheering Manny Pacquiao to victory over Timothy Bradley in last Sunday's title bout--which he won handily--someone was already seeing Philippine peso signs in her eyes. No, not Manny's manager but the country's tax collecting head honcho, Kim Henares of the Bureau on Internal Revenue (BIR). As the picture above implies, these two pugilists have had previous run-ins. Last year, the congressman accused her of "harassing" him over back taxes:

Pacquiao—who is also a congressman representing Sarangani province—has been slapped with a P2.2-billion bill by the BIR, which alleges that he failed to pay taxes for his income from boxing in recent years. For this, tax authorities have ordered local banks to freeze his accounts.

This prompted Pacquiao to call a press conference, saying that he was being harassed by local authorities for taxes that had supposedly been settled in the United States. [The US Internal Revenue Service itself has issued a levy on Pacquiao’s US bank accounts to recoup more than $18 million in alleged tax liabilities from 2006 to 2010.]

The "Taxman versus Pacman" trope meme has been circulating around the Philippine blogosphere. Kim Henares has become a celebrity herself over her tax crusading. As most development scholars know, collecting revenues is problematic in poor countries where limited institutional capabilities makes it easy for tax cheats to declare Mitt Romney-like incomes--or none at all. IFIs like the World Bank have been especially critical of the Philippines' inability to raise taxes collections as a percentage of GDP. For the past few years, it has not even crossed the relatively low 13% threshold. Quoth the World Bank on the Philippines:

Higher investments can be sustained by institutionalizing reforms in public finance. In this regard, a comprehensive program of tax policy and administrative measures should be pursued to raise tax revenues by up to 8 percent of GDP. The government’s medium-term target of an additional 3 percentage points of GDP by 2016 is on the right track. Higher revenues need not be equated with higher tax rates as tax administration can be improved substantially.

For instance, in the first quarter of 2013, the Bureau of Internal Revenue announced a campaign to boost tax collection from self-employed and professionals (SEPs) such as doctors, lawyers, and traders. The government estimates that only about 403,000 out of 1.8 million SEPs paid taxes and the average income declared by SEPs is not far from the income of a minimum wage worker [my italics]. Successful implementation of this campaign can generate up to 2 percent of GDP in tax revenues without raising tax rates.

Actually, there is a method to Henares' madness. She has taken to chasing the Philippines bling-bling crowd who take pride in ostentatious displays of wealth in a poor nation. Yes, professionals--doctors, lawyers and so on--tend to hide income from medical operations and billable hours. But, going after celebrities like Pacquiao has proven especially fruitful in gaining public attention with the message that no one is safe from the taxman. Ever seen the IRS head get featured in gossip columns? She does in the Philippines:

With her staff members diligently helping her, auditing books and sales reports, she knows exactly who, and how much or little, the rich and famous are paying and evading paying. Her first salvo was running after  reported tax evading celebrities as Judy Ann Santos, Regine Velasquez and Richard Gomez. When President Aquino told a meeting of the federation of Chinese businessmen that most of them were not paying the right taxes, he was using information provided by Henares.

Henares joined BIR in 2010. Statistics from her office showed that BIR collection for 2013 grew by 15 percent, exceeding the December 2013 target by 6.44 percent. For December 2013, collections from BIR operations amounted to P94.07 billion. Which is P8.25 billion or 9.1 percent more than collections made in December 2012.

You have to be tough to go after the Philippines' rich and famous like Manny. Fortunately, she appears up to the job. Her hobby is combat shooting (with a competition-spec .45 by the looks of it in the link). Speaking of whom, here's who you're up against, Manny: the submachine gun-toting BIR chief...

Tax honcho Kim Henares has got Manny Pacquiao in the crosshairs

Anyway, after Manny's cool $20 million in earnings from the Bradley fight, Attorney Henares has fired another warning shot already. The interesting IPE angle here is that Pacquiao can pay taxes from his matches in either the United States or the Philippines. What Henares is arguing is that he's better off paying them back home since (a) the tax rate there is lower and (b) a poorer country needs the money more as his tax bill climbs:

WBO Welterweight champion Manny Pacquiao now faces P2.56-billion in tax deficiencies after Sunday's match, Bureau of Internal Revenue (BIR) Commissioner Kim Henares said. In an interview over dzMM [radio] on Monday, Henares added up Pacquiao's guaranteed $20 million purse from his rematch with Timothy Bradley to his alleged back taxes of P1.1 billion from 2008 to 2009 and interests.

The People's Champion can settle the liabilities in the United States where his last fight was held and organized. Henares said, however, that the US Internal Revenue Service demands a 40 percent tax contribution from Pacquiao's earnings, while the BIR only asks for 32 percent.

Kim Henares gets two thumbs up from me--a true kickass woman if there ever was one. Yes, the Philippines certainly stands to benefit from improved revenue collection. Manny Pacquiao is a tax-dodging sissy next to her. Fair is fair so pay up, man! You learn early on who to pick fights with. My advice to Manny is to not @#$% around with Kimmy. I sure wouldn't.

UPDATE: Some lawmakers are apparently upset with Henares' brazen PR stunts designed to get Manny to pay. As I mention above, there are reasons why she must resort to publicity to get her objectives accomplished.

The most fun event the Harvard economics department has sponsored since Kuznets did his song and dance number in drag

How to Give an Applied Micro Talk

Advice from Jesse Shapiro.

BRICs Guy on the EU's Road to Smurfdom

Jim O'Neill is known to most as the Goldman Sachs guy who termed the terms "BRICs" to represent the bloc of large developing countries Brazil, Russia, India, and China and to football fans as the would-be savior of Manchester United from the dastardly, debt-loving Glazer Ameriscum. (See anyone else buy a football team via LBO?) He also coined "MINTs" for Mexico, Indonesia, Nigeria and Turkey, albeit their subsequent performance is even spottier than the BRICs'.

Now, BeyondBRICs points us to a new report from him published by Bruegel that suggests the developed countries will lose a larger share of the world economy faster than he had thought. In other words, it's not just the BRICs but the entire developing country caboodle that's going to be growing especially in trade terms like gangbusters relative to their industrialized counterparts. Most vulnerable are the Europeans who are set for a kicking, especially after O'Neill and his bean counters totted up the figures post-European crisis:

We highlight the dramatic degree of the shifts taking place in world GDP and trade and include fresh projections of what world trade patterns might look like in 2020, should the trends observed over the past decade to continue. We also show the resulting shift in trade relationships for many key countries. European member states tend to have quite different trading partners’ profiles, and this heterogeneity is quite likely to become more pronounced with time. This, in turn, suggests a significant challenge for the effective functioning of the euro area and weakens the original rationale of its creation.

This figure shows precipitous declines in Europe's share of world trade in the next few years leading to 2020:

Individual EU nations are obviously not expected to fare well, with even Germany becoming less important:

Even as a proponent of developing countries, I think he's a tad optimistic and weighs post-European crisis data too much in extrapolating their future performance. We'll see. O'Neill also writes about things a lot of IPE commentators have commented on in that institutions of global economic governance do not fully reflect changes in the world's changing distribution of wealth. Remember, the US still selects the World Bank head, while the EU does the same for the IMF. The Eurocentric G-7 isn't exactly diverse and has become less so since they downsized from the G-8 after kicking out Russia. These ideas should not be new to IPE Zone readers, but it's good to hear an influential economist say the same things.

New Template is Now Fully Operational

Dear readers, in case you haven't noticed--in which case I suggest laser eye treatment, pronto--the blog's template has changed. Over the weekend I have been tinkering with a new template to give the blog a contemporary look and feel. Since messing around with blog templates got me into this line of "business" in the first place, I have a keen interest on presentation. Ever come across blogs that had pretty good content but you didn't visit that much since they looked, well, blah? To better serve my beloved readers, I have always striven to deliver the best in form and function.

I suppose I am not doing too shabbily in either department since the blog still ranks third among Google search results for the term "international political economy." First is the (Humpty Dumpty-esque) Wikipedia entry, second is the excellent description of IPE by Michael Veseth that even I use. Fourth is the Warwick University IPE site--as a graduate of arch-rival Birmingham University I am glad to put them behind (just kidding, Warwick friends)! Fifth is the Review of International Political Economy, a fine journal edited by Greg Chin who I met a while ago.

Some notes in case you are interested:

1. The blogroll has been moved to the footer area. One of the major innovations in web design has been moving a lot of content to this area, so I'm just keeping up. (From three columns we now move back to two columns, too.) Again, I do not necessarily agree with these blogs and sites, but I think they provides a fair representation of interesting material for the wide-ranging discipline that is IPE. Inactive links have been removed.
2. All Foreign Policy blogs have been removed. What sort of jerks put blogs behind a paywall? It's totally against blogging ethos--even the Financial Times and Wall Street Journal which are the finest subscription-based sites do nothing of that sort of shameless money-grubbing. FP hucksters are thus banished. I will not register, let alone pay, for readily available content. A sucker is born every minute, but I hope you are not one of them.
3. The blog title and description are now hard-coded into the header.
4. The Archives and Tags sections have been combined in this neat template I found. For continuity's sake, familiar elements such as the textured background, the LibraryThing widget and the followers list carry over unchanged.
5. The column width is now 1250 pixels. Most visitors to the blog have widths of 1280 or more, so it makes sense to make this move to maximize screen real estate. Ever visit sites that use only half the screen and have teeny-weeny text when viewed at 1920x1080 or higher? I certainly have, and they waste today's higher resolution screens. Previous templates dating from 2007 and 2008 were optimized for 1024x768 and 1280x800 screens that I was operating then, but time moves on. 
6. All blog posts now have folds after a couple of lines on the main screen. For my next blog template, I will probably move to a title + picture template especially if readership keeps moving to mobile devices.
7. The body font is now Open Sans. 
8. There are still some things I am tinkering with such as the drop-down menus. I am also trying to shave off bits of HTML code here and there to speed up page loading by a few milliseconds. Pingdom suggests it loads reasonably fast already...

Otherwise, you are now witness to the firepower of this fully (re)armed and operational battle station. I target all forms of globaloney and hypocrisy. As it has for seven years now, the IPE Zone maintains its integrity by taking no prisoners. You may certainly not favor ideas and opinions expressed here, but rest assured they are mine alone. I do not entertain ads, paid placements, paywalls or other forms of commercial debasement. If you want people trying to sucker you into buying doodads at every turn, head elsewhere.

There will never be enough fish to fry even if I had all the time in the world.

PS: The new "Z" favicon is made to match the new color scheme. I am still deciding which of of the two above I should use.

Poland's Rise and the "Catholic Work Ethic"

Makeup your mind on the reasons for Poland's export success.

Given the woes of Ukraine, many folks there are wondering, "Why are we not like Poland?" And for good reason: Poland's economic resurgence is remarkable set against the backdrop of a stagnant EU. Already, it is aiming to translate its economic clout into political clout. The contrast between Ukraine and Poland cannot be starker. What did the latter do to set the stage for today's success?

There are various reasons Poland, a country of 38.5 million with more than 200 years of tragic history, suddenly finds itself in a position of envy. It has a large internal economy, a business-friendly political class, and the hypercharged potential of a developing country catching up with its western peers. It is playing an increasingly influential role in EU negotiations, often providing a voice of restraint during discussions on how to rebalance an off-kilter euro zone...

Since the fall of the Iron Curtain, Poland has refashioned itself as a model of free-market economics. From 1989 to 2007 its economy grew 177 percent, outpacing its Central and Eastern European neighbors as it nearly tripled in size—the result of a series of aggressive measures taken by the government after the collapse of communism. Price controls were lifted, government wages were capped, trade was liberalized, and the Polish currency, the zloty, was made convertible. The policies left millions out of work but freed Poland to begin to recover from decades of mismanagement. The economy got a further boost with the country’s entry into the EU in 2004.

This, of course, is in stark contrast to Ukraine's staunch anti-reformist post-Soviet history. Now, one of the largest export phenomena to emerge out of Poland is Inglot Cosmetics (male readers should ask the ladies about this brand). In contrast to most male bloggers who consider the subject matter "girly" and avoid them altogether, I keep close tabs on fashion and luxury industries since they are often at the forefront of globalization in terms of leading-edge marketing and distribution. Having to appeal to the most cosmopolitan of consumers means riding trends as soon as they emerge anywhere in the world, and those who claim to write about globalization without covering these industries are quite risible.

Inglot has caught the eye of no less than the Financial Times for its astute business practices. As Inglot branches multiply across the globe, it eventually reached Manila. Coming from the Philippines, I have always been fascinated with hardworking Poles who are now leading the way in the EU. Similar to the Philippines, Poland remains devoutly Catholic. Yet, like Poland, the Philippines is progressing relatively quickly nowadays and is among those leading Asia in growth.

It's quite a turnaround, and this phenomenon has led me to carefully read a wonderful journal article by Martyna Sliwa on how a "Catholic Work Ethic" has emerged to counter the established notion of a "Protestant Work Ethic" whose main idea is that Protestants are less fatalistic than Catholics and thus work harder since their fates are not predetermined:

This article engages the question of whether contemporary Poland is a country in which Catholic Work Values prevail. First, it discusses the meaning of work in Catholic Social Teachings. Then, it provides an overview of the historical experience of Poland and the Polish nation's trajectory of forming its relationship with the Catholic Church. Furthermore, based on a number of empirical studies, it explores the current role of the Catholic religion in the lives of the Poles, with an emphasis on the principles and virtues related to work. It argues that as a consequence of a long period under the occupation of foreign powers between 1795 and 1918, of involvement in the two world wars, and of the post-WWII era of the Communist regime from 1945 to 1989, the model of Catholicism which has developed in Poland is characterised by a strong identification of a large proportion of the society with the Church, but, at the same time, by signs of selectivity towards religion, which transpire also in the way in which the Poles feel about and approach work-related matters.

Critics will of course complain that Italy, Portugal and Spain are prime examples of Catholic failures in Europe, but consider that they are increasingly becoming like the French who are only nominally Catholic as out-of-wedlock births rise and church attendance falls in those countries. The Sliwa article points out that the path taken by Poland in relation to religion and its current rise is idiosyncratic. However, there are certainly points of reference to draw upon for other predominantly Catholic countries. Indeed, if Weber were still around today, he may have to reconceptualize his ideas given the geographically dispersed emergence of fast-growing Catholic economies including Poland (Eastern Europe), the Philippines (Southeast Asia) and Mexico (North America). At the very least, Catholicism may no longer be a brake on growth but even a modest accelerant when combined with certain pro-growth policies.

From marketing their own software to their own makeup, the Poles simply "get" the global marketplace in a way others really haven't by building their own export brands--go ask the Chinese, for instance. Let the "Catholic Work Ethic" show us the way.