Human Development Index HDI

Lecture on the 12th of December

What is the HDI

The HDI – human development index – is a summary composite index that measures a country's average achievements in three basic aspects of human development: health, knowledge, and a decent standard of living

HDI

• HDI measures the average achievements of

a country in three basic dimensions of human development:

a long and healthy life access to knowledge and a decent standard of living.

The HDI is the geometric mean of normalized indices measuring achievements in each dimension

What is the HDI

The HDI ranks countries by level of "human development" and separates countries by 3 groups:

 developed (high development)  developing (middle development) underdeveloped (low development)

What is the HDI

• HDI is a way of measuring development by combining indicators of life expectancy, educational attainment and income into a composite index. The breakthrough for the HDI was the creation of a single statistic which was to serve as a frame of reference for both social and economic development

Components of HDI – three dimensions and four indicators

Components of the HDI

Health is measured by life expectancy at birth.

Education is measured by a combination of its average and expected duration.

Living standards are measured by GNI per capita (in purchasing power parity, PPP US$)

What is the HDI

The index is composed from statistics for Life Expectancy, Education and GNI collected at the national level using special formulas

Origins of the HDIThe origins of the HDI are to be found in

the United Nations Development Programme's UNDP Human Development Reports HDRs. These were devised and launched by Pakistani Economist Mahbub ul Haq  (February 22, 1934 - July 16, 1998) in 1990 and had the explicit purpose: ‘‘to shift the focus of development economics from national income accounting to people centered policies’’ [1

Mahbub ul Haq 

Mahbub ul Haq  Mahbub ul Haq was an influential Pakistani

economist. One of the founders of human development theory, he created the HDI, used since 1993 by the United Nations Development Programme in its annual reports. He also served as the World Bank's director of policy planning (1970-1982) and headed Ministry of Finance of the Government of Pakistan and was Minister of finance and planning (1982-1984)

Mahbub ul Haq 

Mr. Haq founded Human Development Centre, Pakistan in 1996.

==

His selected works:

*The Strategy of Economic Planning (1963)

*The Poverty Curtain (1976)

*Reflections on Human Development (1995)

Mahbub ul Haq 

To produce the HDRs, Haq brought together a group of well known development economists including: Paul Streeten, Frances Stewart, Gustav Ranis, Keith Griffin, Sudhir Anand, and Meghnad Desai. But it was Amartya Sen’s work on capabilities and functionings that provided the underlying conceptual framework

Amartya Sen

Amartya Sen

Amartya Sen

Amartya Sen

Amartya Kumar Sen (Bengali : অমর্ত্য� � কু� ম�রসে�ন, Ômorto Kumar Shen; born 3 November 1933) is an eminent Indian economist. He is currently the Thomas W. Lamont University Professor and Professor of Economics and Philosophy at Harvard University. He is also a fellow of Trinity College at the University of Cambridge, where from 1998 to 2004 he was Master, the first Indian academic to head an Oxbridge college

Amartya Sen

In 1998, Sen won the Nobel Memorial Prize in Economics for his contributions to work on welfare economics.

He is known as "the Conscience of Economics” for his work on famine, human development theory, welfare economics, the underlying mechanisms of poverty, gender inequality, and political liberalism

Amartya Sen

Amartya Sen's books have been translated into more than thirty languages. He is a trustee of Economists for Peace and Security. He has received over 80 honorary doctorates. In the year 2010, Time magazine listed him among the 100 most influential persons in the world

Mahbub ul Haq 

Haq was sure that a simple composite measure of human development was needed in order to convince the public, academics, and policy-makers that they can and should evaluate development not only by economic advances but also by improvements in human well-being. Sen initially opposed this idea, but he went on to help Haq develop the HDI

HDI

Sen was worried that it was difficult to capture the full complexity of human capabilities in a single index but Haq persuaded him that only a single number would shift the attention of policy-makers from concentration on economic to human well-being

Methodology

• The HDI sets a minimum and a maximum for each dimension, called goalposts, and then shows where each country stands in relation to these goalposts, expressed as a value between 0 and 1. Minimum and maximum values need to be set in order to transform the indicators into indices between 0 and 1

Methodology

• To transform a raw variable, say x, into a unit-free index between 0 and 1 (which allows different indices to be multiplied), the  formula from the next slide is used:

Methodology

x-index =

where are the lowest and highest values the variable x can attain, respectively

min

max min

,x x

x x

min max,x x

HDI Calculation

• The HDI is the geometric mean of the three dimension indices:

3 * *HDI LEI EI II

Methodology

The HDI then represents the uniformly geometric average of the following factor indices:

• Life Expectancy Index  LEI

• Education Index  EI Average years of education  MYSI (mean years of

schooling index) Estimated years of education or EYSI (estimated years of

schooling index)

• Real GNI per capita Index II (income index)

Goalposts for HDI in 2013 Report

Indicator Observed maximum Minimum

Life expectancy (years) 85 20

Mean years of schooling

15 0

Expected years of schooling

18 0

GNI per capita (PPP $) 75,000 100

Life Expectancy LE

LE is the expected (in the statistical sense) number of years of life remaining at a given age. It is denoted in the Life Table by ex, which means the average number of subsequent years of life for someone now aged x, according to a particular  mortality experience

Life Expectancy LELE is usually calculated separately for males and

females. Females live longer than males in countries with modern obstetric care.

In countries with high infant mortality rates, the life expectancy at birth is highly sensitive to the rate of death in the first few years of life. Another measure such as life expectancy at age 5 (e5) can be used to exclude the effect of infant mortality to provide a simple measure of overall mortality rates other than in early childhood

Life Expectancy Index  LEI

• The life expectancy at birth component of the HDI is calculated using a minimum value of 20 years and maximum value of 85 years

Life Expectancy Index LEI

• Life Expectancy Index =

• The Life Expectancy Index is a statistical measure used to determine the average lifespan of the population of a certain nation or area. Life expectancy is also a factor in finding the physical quality of life of an area

20

85 20

LE

Life Expectancy Index LEI

• Thus, the LE component for a country where life expectancy at birth is 55 years would be 0.550

55 20

85 20LEI

350.412

65LEI

Education Index

• The education Index is measured by mean of years of schooling for adults aged 25 years and expected years of schooling for children of school going age. Mean years of schooling is estimated based on duration of schooling at each level of education. Expected years of schooling estimates are based on enrolment by age at all levels of education and population of official school age for each level of education

Education Index EI

where

 

 

2

MYSI EYSIEI

0

15 0

MYSMYSI

0

18 0

EYSEYSI

Real GNI per capita Index II

• The decent standard of living component is measured by GNI per capita (PPP US$). The HDI uses the logarithm of income, to reflect the diminishing importance of income with increasing GNI. For the wealth component, the goalpost for minimum income is $100 (PPP) and the maximum is $ 75000 (PPP)

Real GNI per capita Index II

ln ln100

ln 75000 ln100PCGNI

II

HDI

• The HDI facilitates instructive comparisons of the experiences within and between different countries

• Reference:

• http://hdr.undp.org/en/humandev/