2010 Big Mac Index | Increased differences between Baku and Tbilisi

In 2007 we wrote a blog post on the Big Mac Index, an index published by The Economist as an informal way of measuring purchasing power parity (PPP). The idea is that a dollar should buy you the same amount in all countries, and as a Big Mac is assumed to be produced in the same way everywhere it can serve as a point of comparison. You can thus determine how far off the exchange rate is between countries, in terms of citizens’ ability to buy the same “basket” of goods and services (in this case a Big Mac hamburger).

Back in 2007 a Big Mac cost 4.60 GEL (lari) in Georgia (which at the time was equal to 2.60 USD) and 2.50 AZN (amat) in Azerbaijan (2.73 USD). The price was thus similar in the two countries, and, according to the 2006 Big Mac Index, comparable to Hungary and Mexico. The same year, one had to pay 3.15 USD for the burger in the U.S. The only former Soviet country on The Economist’s list was Russia, and it placed much further down with the cost for a Big Mac equaling 1.6 USD.

Three years on a striking difference in price is now apparent. McDonalds is still not established in Armenia but a comparison can be made between Azerbaijan and Georgia and the rest of the world. As of March 2010, the price for a Big Mac in Georgia is 5.50 GEL, which according to the current exchange rate equals 3.2 USD. The price has therefore risen by almost 20 percent but at the same time the USD has gotten weaker in comparison with the GEL. According to the 2010 index, Georgia places between South Korea and Britain, relatively close to the U.S. at 3.58 USD. Without making any attempts to evaluate the strength of the lari in comparison to the USD, the Big Mac Index shows that the Georgian currency is somewhat undervalued.

In Azerbaijan, by contrast, the price for a Big Mac today is as much as 3.2 AZN, which equals 3.98 USD, a 28 percent increase from 2007. The huge increase in price means that a Big Mac in Azerbaijan is now more expensive than in the U.S., placing Azerbaijan on the same place as Australia, according to the index, indicating that the amat went from being slightly undervalued in comparison with the USD in 2007 to being overvalued today.

	2010	2006
Switzerland	6.16	4.93
Euro Area	4.62	3.51
Canada	4.06	3.01
Azerbaijan	3.98	2.73
Australia	3.98	2.44
Hungary	3.85	2.71
Turkey	3.71	3.07
United States	3.58	3.15
Japan	3.54	2.19
Britain	3.48	3.32
Georgia	3.2	2.6
South Korea	3	2.56
Poland	2.86	2.09
Mexico	2.56	2.66
South Africa	2.44	2.29
Russia	2.39	1.6
Egypt	2.37	1.61
Taiwan	2.36	2.35
Indonesia	2.28	1.54
Thailand	2.16	1.51
Malaysia	2.12	1.47
China	1.83	1.3

*Note that the numbers for Azerbaijan and Georgia are from 2007.

The price difference between Baku and Tbilisi was only 13 cents in 2007 but today is as much as 1.03 USD. Differences between the two countries have thus grown immensely in only three years. Russia is still in the lower part of the list with the cost for Big Mac being 2.34 USD. China is at the very last place of The Economist’s rating, indicating that the RMB (yuang) is greatly undervalued in comparison with the USD.

Comparing the currencies in the South Caucasus with the starting point in a McDonalds product might not be suitable for several reasons (e.g. there are few McDonalds restaurants in the Caucasus compared to other countries). The International School of Economics in Tbilisi (ISET) has recognized this and created their own index: the “Khachapuri Index”. It is based on the Big Mac Index but with the main purpose to measure inflation. Have a look at here.

Comments and comparisons to other purchasing power indices are welcome!

Gender imbalances | The South Caucasus on the top of the list

Earlier this month The Economist published two articles (article one, article two) on imbalances in gender. In all societies there is, at birth, a sex ratio slightly biased in favor of boys: 103-106 boys to 100 girls. The number evens out later on as male babies have a higher mortality rate than female babies. In some parts of the world, however, there currently is an abnormally high number of boys being born.

The Economist explains the phenomenon of imbalances in the genders by a preference in the society for boys, together with the modern family’s desire for a small family and the increased availability of sex-determining mechanisms such as ultrasounds. Some authors, and The Economist itself, have called this development “gendercide” (to use the title from Marry Anne Warren’s 1985 book). Globally, as many as 100 million girls are assumed to have “disappeared”.

The articles focus on China and India, countries that are said to have the highest rates of gender imbalances. But excessively high numbers of male babies is not a problem confined to the Far East. Data from the United Nations show the prevalence of distorted sex rates also in the South Caucasus. On the list of countries with the highest levels of gender imbalances we find Armenia, Azerbaijan and Georgia in the top (see chart below).

The problem of distorted sex ratios in the South Caucasus is not a new problem. After the collapse of the Soviet Union, there was an upsurge in the ratio of boys to girls in Armenia, Azerbaijan and Georgia. According to a UNICEF report from 2007 the sex ratios rose from normal levels in 1991 to 110-120 in 2000. These changes occurred simultaneously in all three countries, in sharp contrast to neighboring countries.

So why have we heard so little about this and where is the discussion today? Any thoughts on this?

New Policy Advice on Migration and Development in Georgia

Migration is a major factor in Georgia. Many Georgians live abroad, and by some estimates the money they send back accounts for nearly 10% of Georgia’s GDP. Did you know that households in rural areas who receive such aid are less likely to be poor, but that in Tbilisi, the opposite is true? Robert Tchaidze from the IMF and Karine Torosyan from CRRC’s partner institution ISET are about to reveal not only who in Georgia migrates, and when and where they go, but also how the country could take advantage of these migration flows in the future.

Their report “Measuring and Optimising the Economic and Social Impacts of Migration in Georgia” is not yet available online, but you can find an early summary. Robert and Karine’s work is part of the global project “Development on the Move” that was created by the Global Development Network and the Institute for Public Policy Research. It aims at analyzing the impact of migration on development around the world, and how these flows can be profited on with adapted public policy, as we had previously mentioned in our blog.

Georgia is one of six countries that have been selected for in-depth quantitative and qualitative studies. In this particular case, CRRC carried out the fieldwork, and we are happy to see our high-quality data used for valuable public policy advice.

Please let us know if you would like to receive the full document once it gets released publicly.

Work in Progress | Workshop Opportunity with CRRC Georgia

After a couple of informal workshop events, our Georgian office has decided to create a series of workshops called Work in Progress, or WiP in short. The idea is that people can present ongoing research and get feedback, primarily with the aim of generating suggestions that help them improve their work.


The typical format is a relatively short presentation, followed by a hands-on discussion. We do this together with ARISC and American Councils. The events are coordinated by William Sadd, who is representing ARISC in Georgia.


Today we started with a talk by Tim Blauvelt about research on Language Status in Georgia. (We will tell you more once the project is completed, it's a very exciting replication of experiments that have never been conducted in the South Caucasus.) 


So if you have research that you would like to present, a questionnaire that you want feedback on, a paper that is about to go to a conference, let us know. We'd like to get people together to give you good feedback.


The events will typically be held on Wednesdays, at 5.30, and we will advertise them through Facebook. Find us there, become our fan, and join us for the events.