Mandelian Economics

  Premise:  Almost all political candidates argued that while the Portuguese economy converged with the European one, it was still outperformed by those from the former USSR economies that joined the European Union since 2004. The European Union membership expanded by 13 members (from 15 to 28, now 27) since 2004. These were: 2004: Czech Republic (CZ) Cyprys (CY) Estonia (EE) Hungary (HU) Latvia (LV) Lithuania (LT) Malta (MT) Poland (PL) Slovakia (SK) Slovenia (SI) 2007: Bulgaria (BG) Romania (RO) 2013: Croatia (HR) Of these, only the Czech Republic, Hungary, Poland, and Romania have not adopted the Euro as their currency.  Let's assume politicians use GDP per capita (at market values) as the metric of choice. In that case, Portugal went from being the 15th richest country in the EU-27 in 2004 to the 18th in 2019. Between 2012 and 2019, four countries overtook Portugal in the ranking: Malta (17th to 12th), Slovenia (16th to 15th), Czech Republic (18th to 16th), and Estoni...

Premise:  A worker, who has earned minimum wage for the past 15 years, argued on TV he lost purchasing power during the past government. Was the interviewee correct or not? This is a common complaint among Portuguese and one that anyone will easily hear in a political debate (or at a  café,  for that matter). Thus, it seemed just right to be the topic of the first post in this blog. First, we need to have a definition of purchasing power. For now, and to keep it simple, I'll use CPI as the deflator to construct the purchasing power. Plotting the minimum salary and the average base salary (before food and transportation subsidies, and bonuses) since 2000, we get a chart similar to this:  where the dashed lines are the nominal values and the thick lines are in purchasing power parity (i.e., deflated by inflation). Values are calculated as monthly wage times 14 months, divided by 12, thus accounting for Christmas and summer bonuses. Two striking conclusions from this ch...