Correlation paradox July 8, 2008
Posted by ocmpoma in : economics , trackbackWikipedia’s article on the resource curse defines it as the problem that “…countries with an abundance of natural resources tend to have less economic growth than countries without these natural resources.”
Mark Thoma at Economist’s View has a post up describing recent work indicating that this particular curse might be as real as… well, as any other curse. His post quotes an India University news article, on the work of IU and Duke economists Michael Alexeev and Robert Conrad, which says that the idea of the curse, which is decades-old, can be chalked up to bad data analysis and the old ‘correlation as causation’ issue:
“In essence,” Alexeev said, “the logic of the earlier work was as follows: Most countries with high GDP have good institutions. Natural resource-rich countries, however, have high GDP but poor institutions. Therefore, natural resources must lead to poor institutions.”
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