Economic Conditions Analysis Chapter 2 part II Jamshed uz Zaman

Human Poverty Index Human Development Index Source UNDP, Human Development Report -- Human Development Index (HDI) -- Human Poverty Index (HPI)

Human Development Index HDI is based on Life expectancy at birth (25-85 years) Educational Attainment (Adult literacy, 2/3 weight) (0-100%) and (combined enrolment ratios, 1/3 weight) Standard of Living (Real PCY at PPP) $100 -$40,000) (complex) Actual Value – Minimum Value Index = ------------------------------------------- Maximum Value – Minimum Value

Example (2001) India Bangladesh Life Expectancy: 62.9 – 25 37.9 ---------- = ------ = 0.63 85 - 25 60 Educational Attainment [56.5(2/3)+56(1/3)] ÷ 100 = 0.56 GDP = 0.52 HDI = (0.63 + 0. 56+0.52)/3 = 0.57 Life expectancy: 58.9 – 25 33.9 ---------- = ------ = 0.565 85 - 25 60 Educational Attainment [40.8(2/3) + 37(1/3)] ÷ 100 = 0.395 GDP = 0.45 HDI = (0.565 + 0.395 +0.45)/3 = 0.47

Human Poverty Index (HPI) The percentage of the population not expected to survive to the age of 40 (P1), The adult illiteracy rate (P2), A deprivation index based on average of two variables: the percentage of the population without access to safe water and the percentage of underweight children under five years old (P3).

The Formula for HPI HPI = [1/3{P13 + p23 + P33} – 3]1/3 = 34.3 = 43.3 Bangladesh HPI = [1/3{(21.4)3 +(59.2)3 +1/2(3+56)3}-3] 1/3 = 43.3 India HPI = [1/3{(16.7)3 +(43.5)3 +1/2(12+53)3}-3] 1/3 = 34.3 HPI = [1/3{P13 + p23 + P33} – 3]1/3

Can the poor countries ever catch up Y Dt = current level of per capita income in developed countries say $25,000 YDCt = current level of per capita income in poor countries say $1200 rD = per capita income growth of developed countries, rDc = per capita income growth of poor countries, Y D* = assumed PCY in 2020, say $45,000 of developed countries rDC* = required per capita growth rate of the poor countries. How long it would take to catch up? YDt = YDCt (1 + rDC)n Or, Or n = log(2500/1200)/log(1.02)

Can the poor countries ever catch up? (contd.) n = log(2500/1200)/log(1.02) = 153 years At a growth rate of 2% poor countries would require 153 years to reach current living standard of the developed countries.

Elimination of per capita income gap How many years would it take [log(2500/4000)] / [log(1.06)- log (1.03)] = 64 years YDt ( 1+rD)n = YDCt ( 1+rDC)n n = [log(YDt/ YDCt )]/[log(1+rDC)- log(1+rDC)]

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