When In India, Get a Haircut!

Here is the first of our MRUniversity videos made in India! It was a lot of fun to make. The video introduces the Balassa-Samuelson effect (also called the Penn effect) and why we need purchasing power parity corrections. Eventually, we will update our entire Development Economics course to the same production quality. Enjoy!


I look forward to the "parity corrections" video, but I will make one observation now. As many highly trained professionals in America have learned, some services can be shifted to relatively low cost countries. To take three examples, accounting, radiology, and tech support services, all made possible by computers. Think about that: computers are made in relatively low cost countries (China, for example), which in turn provide the technology for services to be shifted to relatively low cost countries (India, for example). Today, it's not possible to be in America while getting a haircut in India or build a house in America with labor in Mexico, unless the Indians and Mexicans move to America. But one day it may be possible. Building a house, for sure, as more technologically advanced techniques are employed (such as prefabrication). But a haircut? Maybe someone will invent the hair cutting simulator, a 3D printer for haircuts. That could lead to other personal service simulators, such as the massage simulator or the, well, very personal service simulator.

I recently had to find another ISP, and I considered Earthlink. But a few years ago Earthlink outsourced all of their tech support to India and when I called them they had difficulty answering even the most basic questions about their service.

Radiology seems to have gone well, but I don't know the industry well enough to say so. Tech support, no so much. I've seen some good examples of it, but bad outweighs the good. I've never heard of accounting being outsourced like that, maybe some low level stuff, but I sure hope anyone deciding anything more than that would be fired immediately.

Advances in computer vision has also reduced the scope of radiology out-sourcing.

In addition, take a gander at job openings in machine learning in India. You can easily make close to $200,000 US, working for American Express in India, doing predictive modeling, anomaly detection, etc. A surgeon in a big city in India can make close to $300,000 US. Yes there are low-cost pockets, but justifying India on pure cost-basis will not work any more.

Not sure what your source of data is. I have friends at American Express in India (I'm Indian), and the typical mid-management salaries for statistical modeling etc is closer to $35,000-45,000 per year. As far as surgeons are concerned, you have to have deep expertise (25+ years) before you can command anything like the numbers you quote.

There's a lot of insourcing of tech support, especially to smallish towns in the midwest. Neutral accents, sensible education levels, relatively low pay. And don't miss the AI for tech support push. They are cheaper than an indian call center, and will be good enough earlier than you think.

@Ankur - you're probably right about surgeon's salary - though I think $300,000 is close to what is declared to the authorities. Consultations are sometimes off the books. The $200,000 figure is what I heard from several recruiters from India.

Don't you think Alex would look better in dreadlocks?

+10 that's deep bro

2:34 - Does the left hand v. right hand thing matter in India when passing money?

Yes, you are correct. I would say it odes. I am surprised that Alex, having lived this long in India, has not yet moved to handing over cash with the right hand. Though in urban settings now many may not be as sensitive to it as they would be in a rural setting.

If price disparities are greatest for non-tradeable services, then wouldn't we expect that, if we allowed more immigration, the immigrants would take mostly low-wage (by American standards) service jobs? Those are the supposedly undesireable jobs anyways. High-wage manufacturing jobs produce tradeable goods that can be made and shipped anywhere.

So, which is it? Are worries that immigrants take good jobs away from natives overblown because immigrants take mostly service jobs or are those service sector jobs actually good jobs after all so that we should stop carping about not enough manufacturing jobs?

Service jobs are all that Americans are left. The good manufacturing jobs won't come back because Red China has American leaders in its pockets. Follow the money.

What about me?

Russia has one leader at its pocket if much. But Americans worship the Almighy Dollar and China has much more koney to lavish on morally weak people than Russia has. Chinaa has bought South Korea off and silsnced international opposition to their barbaric despotism. The 2008 Olympic Games will be remembered together with 1936.

Should you visit the dentist too? Maybe even get a full health check while you're there?

I understand that the relative price might not be much lower (e.g. dentistry might only 20% cheaper in India, whereas a haircut is 90% cheaper); but the absolute price saving in $ will probably be greater.

While I can't speak for India, that is true for many countries in Asia and Latin America. Even focusing on relatively high end, upper middle class dentists with great facilities, you can save between 30-60% on the prices in the US. For example, high quality tooth caps can go for $250-$350 each while I have to pay nearly $1000 each even with some insurance in the US. Panoramic mouth xrays are often around $20-$25 abroad not the $100 my dentist charges here.

I got the first buzz cut of my life for a backpacking trip. People are a bit divided on how it looks, but mostly positive. The main thing though is the wonder of zero maintenance. Wash, dry, done.

It might be a summer thing from now on.

To maximize purchasing power, I went to the $8 Vietnamese immigrant barber shop, where comically, I am only semi understood. If I were younger uncertainty in a haircut would be a bigger deal

I do the #1 buzz but I do it myself. I would rather go to the $8 Vietnamese barber. We don't have those. We have the $18 Great Clips or the $20 independent barber. So I pass on that. Because I'm cheap like that sometimes.

I found a $12 barber once while traveling. He threw in the hot towel and a brief shoulder massage with some ancient device. I would always go to him if I could, but I cant.

It takes about 5 minutes for this kind of cut. Someone could make money doing it for $10 bucks. If all the ppl who wanted buzz cuts knew where you were. A cart perhaps.

The left hand is used by indians for cleaning the anus with water after passing bowels. We don't use toilet paper. Hence the aversion to using left hand, particularly for eating.

What is a traceable service may depend on technology as well.

Software developers in India communicate on the internet with a US firm.

some services are traceable with technology.

traceable not traceable


So now we can count on Alex and Tyler using PPP for cross country GDP and GDP per capita comparisons!

The technology just hasn't caught up yet. I remember when we couldn't get fresh fruit out of season from the other side of the world, but now it's common. Haircuts won't be far behind.

Wonder if Alex would have liked this fiery cut.

I am just glad that Alex did not purchase, and compare the price of, that personal service which is performed by the oldest profession in the world.

Professor Tabarrok: this was very nicely done. In addition to the high production value, the optional questions at the end are a useful feature. One suggestion: you might consider putting a few citations at the end of the video as well, as one might find in a "regular" text book. Thanks for your work on this; based on this video I will be watching more and recommending them to my students.

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