Human Development Measurement Francesco Burchi - - PowerPoint PPT Presentation

Human Development Measurement

Francesco Burchi

Francesco.burchi@die-gdi.de

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Table of Contents

 Human Development Index: goal,

components and aggregation procedure

 New HDI  Inequality-adjusted HDI

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The Human Development Index (1990)

 It was elaborated following strong

criticisms towards GDP growth

 “Any measure that values a gun several

hundred times more than a bottle of milk is bound to raise serious questions about its relevance for human progress” (ul Haq 1995, p. 46).

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Old and New HDI

 It is a composite indicator that cannot reflect

the whole Human Development Approach

 It has the main objective to shift the focus

from the means of development to the ends.

 The HDI was introduced to cover both social

and economic choices.

 A composite index was constructed rather

than a plethora of separate indices.

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Old and New HDI (2)

 One of the most important decisions was

to keep the coverage and methodology

• f HDI quite flexible – subject to gradual

refinements as analytical critiques merged and better data became available.

 The old HDI is available for 177

countries, the new HDI 187.

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HDI: Which components?

 Components should reflect basic capabilities,

which are those universally accepted and without which people are harmed (Fukuda Parr 2003, 97-99).

 Problem of operationalization: only

functionings.

 How many components? Problem of

multicorrelation, double-counting and simplicity.

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HDI: Components (2)

 Final components:

• 1. Long and healthy life
• 2. Knowledge
• 3. Decent standard of living

 The first two are ends, the third is a means.

It is a proxy for all other variables not reflected in the first two components.

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HDI: Components (3)

 Other components? Long

debate…environment, mortality rates, political freedom…

 The index should be taken with caution:

choice of dimensions is also based on data availability (Sen).

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Units of Measurement

 Each component is measured by one or more

variables, which have different units of measurement.

 Standardization:  Max and min are not those currently observed, but set

• n a theoretical basis. Min. mean years of schooling

=0 (societies can subsist without formal education), max.=15 (projected maximum of this indicator for 2025).

 Each component has a value >=0 and <=1.

MinValue MaxValue MinValue e ActualValu  

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Current goalposts

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Component 1: Long and healthy life

 Variable: life expectancy at birth  Unit of measurement: years.  Standardization:

Kenya 2014

Max=85 Min=20

64 . 20 85 20 6 . 61   

Life Expectancy Index=

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Component 2: Knowledge

 The Knowledge component is now

measured by two variables (with equal weight): A) Mean years of schooling; B) Expected years of schooling

 then aggregated through simple arithmetic

mean…

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HDR 2010 & 2014: changes in the HDI (2)

 Mean years of schooling of adults (years) = average

number of years of education received by people aged 25 and older in their lifetime based on education attainment levels of the population converted into years of schooling based on theoretical durations of each level of education attended (Barro and Lee, 2010)

 Expected Years of schooling of children (years) =

number of years of schooling that a child of school entrance age can expect to receive if prevailing patterns

• f age-specific enrolment rates were to stay the same

throughout the child’s life (UNESCO Institute for Statistics, 2010).

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An example

42 . 15 3 . 6    

Mean years of schooling Index

61 . 18 11    

Expected Years of schooling

Education Index = (0.42 + 0.61)/2 = 0.515 Kenya 2014

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Component 3: Decent standard of living

 PPP-adjusted per capita GNI: GNI is the income

accrued to residents of a country, including international flows such as remittances and aid, and excluding income generated in the country but repatriated abroad.

 It is measured in USD

501 . ) 100 ln( ) 75000 ln( ) 100 ln( ) 2762 ln(     GNIIndex

Minimum= 100 Maximum= 75000 Kenya 2014

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Aggregation

 Weights: there is no evidence regarding which capability

is more important, thus each of the three dimensions has a weight equal to 1/3.

 Aggregation procedure: geometric mean. No perfect

substitutability across the dimensions: a low achievement in one dimension is not perfectly compensated for by high achievement in another dimension. New HDI = Indexlife1/3 · IndexEducation 1/3 · IndexIncome 1/3

HDI_Kenya = 0.641/3 · 0.515 1/3 · 0.501 1/3 = 0.548

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The New HDI

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HDI tables

 HDI Value (between 0 and 1)  HDI Ranking  Division of countries in 4 groups:

• Very High Human Development Countries (HDI>=0.80)
• High Human Development Countries (0.80>HDI>=0.70)
• Medium Human Development Countries (0.70>HDI>=0.550)
• Low Human Development Countries (HDI<0.550)

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Exercise

Country Life expectancy at birth Mean years of schooling Expected years

• f schooling

GNI per capita (years) (years) (years) (2011 PPP $) 2013 2012 2012 2013 Senegal 63.5 4.5 7.9 2,169 Zimbabwe 59.9 7.2 9.3 1,307 Lesotho 49.4 5.9 11.1 2,798 Ethiopia 63.6 2.4 8.5 1,303 Uganda 59.2 5.4 10.8 1,335 Syrian Arab Republic 74.6 6.6 12.0 5,771 Malawi 55.3 4.2 10.8 715 19

Questions

• 1. What is the value of the HDI for these 7 countries?
• 2. What is their ranking based on the HDI?
• 3. How could we compare country’s relative position depending on

whether we use GNI or HDI as a measure of development?

• 4. Does the HDI ranking changes if we aggregate dimensions

through arithmetic rather than geometric mean?

HDR 2010 & 2014: changes in the HDI (http://hdr.undp.org/sites/default/files/hdr14_te chnical_notes.pdf )

• 1. Goalposts are changed: max and min are not
• bserved, but set on a theoretical basis. Min. mean

years of schooling =0 (societies can subsist without formal education), max.=15 (projected maximum

• f this indicator for 2025.
• 2. The Knowledge Component is now measured by

two variables (with equal weight): A) Mean years

• f schooling; B) Expected years of schooling
• Critique to the binary nature of adult literacy

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HDR 2010 & 2014: changes in the HDI (2)

 Mean years of schooling of adults (years) = average

number of years of education received by people aged 25 and older in their lifetime based on education attainment levels of the population converted into years of schooling based on theoretical durations of each level of education attended (Barro and Lee, 2010)

 Expected Years of schooling of children (years) =

number of years of schooling that a child of school entrance age can expect to receive if prevailing patterns

• f age-specific enrolment rates were to stay the same

throughout the child’s life (UNESCO Institute for Statistics, 2010).

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HDR 2010 & 2014: changes in the HDI (3)

• 3. PPP-adjusted per capita GNI replaces PPP-adjusted

per capita GDP in the component “decent standard

• f living”: this is because GDP is the monetary

value of goods and services produced in a country, GNI is the income accrued to residents of a country, including international flows such as remittances and aid, and excluding income generated in the country but repatriated abroad.

• Moreover, natural logarithm replaces that with the

base of 10.

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HDI Vs. GDP

 GDP focuses on the average income owned, while HDI

tells us also about the DISTRIBUTION and the USE of income for valuable purposes.

 GDP cannot be adjusted following people’s diversity

(disability, age, sex, metabolism = conversion factors).

 HDI shows directly the areas where performances are

eventually low, thus where interventions should be made.

 HDI can be disaggregated, by gender, ethnicity, region

….

 HDI can also tell us about future economic growth

because having accumulated human capital (education and health) can lead in the future to the enlargement of economic possibilities.

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HDR 2016

 HDI 2016 Table 1:

http://hdr.undp.org/en/composite/HDI

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The Inequality-adjusted HDI

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Inequality-adjusted HDI (2010) (see notes HDR 2014 and http://hdr.undp.org/en/faq-page/inequality- adjusted-human-development-index-ihdi#t293n91 )

 The IHDI adjust the HDI for inequality in the

distribution of each dimension across the population

 IHDI=HDI if there is no inequality in all the

dimensions (thus, IHDI<=HDI)

 Data source different from HDI data source

because we need information on the distribution of life expectancy, schooling, and disposable income/consumption.

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IHDI: Step 1

 Measuring inequality in each of the 3

dimensions

 Ax >=0 because geometric mean cannot be

higher than arithmetic mean

 The higher the difference between the two

means, the higher inequality is.

Geometric mean of the distribution Arithmetic mean of the distribution

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IHDI: Step 2

 Adjusting the dimension indices for

inequality

 The inequality-adjusted income index, I*IIncome, is

based on the unlogged gross national income (GNI) index, I*Income.

Dimension Index Inequality measure

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IHDI: Step 3

 Aggregation through geometric mean

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PPP

Purchasing power parity in US$ The purchasing power of a country’s currency, defined as the number of units of that currency required to purchase the same (or very similar) representative basket of goods and services that a US dollar (the reference currency) would buy in the United States.

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