1. Economic Conditions Analysis Chapter 2 part II
Jamshed uz Zaman

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

3. 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

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

5. 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).

6. 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

7. 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)

8. 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.

9. 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)]

10. Thank you