2 Table of ContentsHuman Development Index: goal, components and aggregation procedureNew HDIInequality-adjusted HDIGender Inequality Index
3 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).
4 Old and New HDIIt is a composite indicator that cannot reflect the whole Human Development ApproachIt 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.
5 Old and New HDI (2)One of the most important decisions was to keep the coverage and methodology of 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.
6 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.
7 HDI: Components (2) Final components: 1. Long and healthy life 2. Knowledge3. Decent standard of livingThe first two are ends, the third is a means. It is a proxy for all other variables not reflected in the first two components.
8 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).
9 Units of MeasurementEach component is measured by one or more variables, which have different units of measurement.Standardization:Max and min are not observed, but set on 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.
11 Component 1: Long and healthy life Variable: life expectancy at birthUnit of measurement: years.Standardization:Kenya 2014Max=85Min=20Life Expectancy Index=
12 Component 2: KnowledgeThe Knowledge component is now measured by two variables (with equal weight): A) Mean years of schooling; B) Expected years of schoolingthen aggregated through simple arithmetic mean…
13 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 of age-specific enrolment rates were to stay the same throughout the child’s life (UNESCO Institute for Statistics, 2010).
14 An example Kenya 2014 Education Index = (0.42 + 0.61)/2 = 0.515 Mean years of schooling IndexExpected Years of schoolingEducation Index = ( )/2 = 0.515
15 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 USDKenya 2014Minimum= 100Maximum= 75000
16 AggregationWeights: 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 1/3HDI_Kenya = 0.641/3 · /3 · /3 = 0.548
18 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)
19 Exercise Questions What is the value of the HDI for these 7 countries? CountryLife expectancy at birthMean years of schoolingExpected years of schoolingGNI per capita(years)(2011 PPP $)20132012Senegal18.104.22.168,169Zimbabwe22.214.171.124,307Lesotho49.45.911.12,798Ethiopia126.96.36.199,303Uganda59.25.410.81,335Syrian Arab Republic74.66.612.05,771Malawi55.34.2715QuestionsWhat is the value of the HDI for these 7 countries?What is their ranking based on the HDI?How could we compare country’s relative position depending on whether we use GNI or HDI as a measure of development?Does the HDI ranking changes if we aggregate dimensions through arithmetic rather than geometric mean?
20 HDR 2010 & 2014: changes in the HDI (http://hdr. undp Goalposts are changed: max and min are not observed, but set on a theoretical basis. Min. mean years of schooling =0 (societies can subsist without formal education), max.=15 (projected maximum of this indicator for 2025.The Knowledge Component is now measured by two variables (with equal weight): A) Mean years of schooling; B) Expected years of schooling- Critique to the binary nature of adult literacy
21 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 of age-specific enrolment rates were to stay the same throughout the child’s life (UNESCO Institute for Statistics, 2010).
22 HDR 2010 & 2014: changes in the HDI (3) PPP-adjusted per capita GNI replaces PPP-adjusted per capita GDP in the component “decent standard of 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.
23 HDI Vs. GDPGDP 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.
26 Inequality-adjusted HDI (2010) (see notes HDR 2014 and )The IHDI adjust the HDI for inequality in the distribution of each dimension across the populationIHDI=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.
27 IHDI: Step 1 Measuring inequality in each of the 3 dimensions Ax >=0 because geometric mean cannot be higher than arithmetic meanThe higher the difference between the two means, the higher inequality is.Geometric mean of the distributionArithmetic mean of the distribution
28 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.Inequality measureDimension Index
30 The Gender Inequality Index (2010) Replaces the Gender-related Development Index and the Gender Empowerment MeasureMain drawbacks of past indicators:Unreliable data especially for gender-disaggregated incomeMix of absolute and relative variablesMain focus on gender bias in elites and urban areas (in the case of GEM)Computed for 140 countries
31 GII: main purpose To highlight women’s disadvantage in 3 dimensions: Reproductive healthEmpowermentAccess to labour market
32 GII: Variables (http://hdrstats.undp.org/en/indicators/24806.html) Reproductive health: maternal mortality ratio and adolescent fertility rate (number of births per 1,000 women age years)Empowerment: share of parliamentary seats by sex and attainment at secondary or higher levelsLabour market: labour market participation rate (Percentage of the working-age population (ages 15–64) that actively engages in the labour market, by either working or actively looking for work)
33 GII calculation http://hdr.undp.org/en/statistics/gii/ see technical notes HDR 2010: and
34 PPPPurchasing 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.