Archive for November 15th, 2010

It’s a well observed phenomenon that human development incomes are highly correlated with economic measures like GDP. However, that doesn’t mean that improvements in GDP cause, or even correlate with, improvements in human development indicators. Economix points to the UN’s new Human Development Report, which addresses this issue. As Catherine Rampell writes,

As you can see, the correlation between per-capita income and other measures of human development is, in the works of the report, “remarkably weak and statistically insignificant.”

Rampell goes on to explore some possible explanations:

The report offers a few possible explanations for this puzzle, including that there might be a long lag between economic growth and the types of social services and infrastructure that could lead to better national health and education systems. There also may be many other country-specific variables — like cultural differences — that mask a possible relationship between wealth and human development.

I don’t have time to read the report, but I wonder if they address the issue of inequality. Someone came to Brookings a while back and showed how inequality was a key factor in determining the poverty-reducing content of economic growth. Thus, high inequality could also hold back these indicators, which are correlated with levels of poverty.

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