1. Human Development Index vs Unemployment Rate
CHEUNG Siu Kit Everest
YIU On Pui Patrick
YIP Ning Yan
LEUNG Cheuk Man
TANG Shirley

2. Introduction

3. What is HDI?
The Human Development Index (HDI) 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.
It is a standard means of measuring well-being. It is used to determine and indicate whether a country is a developed, developing or underdeveloped country.
It is also used to measure the impact of economic policies on quality of life.

4. Background
The index was developed in 1990 by Indian Nobel price winner Amartya Sen, Pakistani economist Mahbub ul Hag and Sir Richard Jolly, with help from Gustav Ranis of Yale University and Lord Meghnad Desai of the London School of Economics.
It has been used since then by the United Nations Development Programme in its annual Human Development Report.

5. HDI components
HDI measures the average achievements in a country in three basic dimensions of human development:
A long and healthy life, as measured by life expectancy at birth
Knowledge and education, as measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting)
A decent standard of living, as measured by the natural logarithm of gross domestic product (GDP) per capita at purchasing power parity (PPP) in USD.

6. High Medium Low ██ 0.950 and over ██ 0.900–0.949 ██ 0.850–0.899
██ 0.900–0.949
██ 0.850–0.899
██ 0.800–0.849
Medium
██ 0.750–0.799
██ 0.700–0.749
██ 0.650–0.699
██ 0.600–0.649
██ 0.550–0.599
██ 0.500–0.549
Low
██ 0.450–0.499
██ 0.400–0.449
██ 0.350–0.399
██ under 0.350
██ not available

7. Life Expectancy at birth (years)
██ over 80
██ 
██ 
██ 
██ 
██ 
██ 
██ 60-65
██ 55-60
██ 50-55
██ 45-50
██ 40-45
██ under 40
██ not available

8. Literacy Rate

9. High Medium Low ██ 0.950 and over ██ 0.900–0.949 ██ 0.850–0.899
██ 0.900–0.949
██ 0.850–0.899
██ 0.800–0.849
Medium
██ 0.750–0.799
██ 0.700–0.749
██ 0.650–0.699
██ 0.600–0.649
██ 0.550–0.599
██ 0.500–0.549
Low
██ 0.450–0.499
██ 0.400–0.449
██ 0.350–0.399
██ under 0.350
██ not available

10. Income Distribution

11. Past top countries

12. Methodology of HDI

14. Leading a long and healthy life – Expectancy index
Is represented in the HDI by life expectancy at birth
The upper goalpost 85 years gives a life expectancy of 1 and a value of 25 gives a value of 0.
The life expectancy index is one-third of the overall HDI.
E.g. Life expectancy index = 78 – 25 = 0.883

15. Having knowledge – Education index
Measures a country’s relative achievement in both adult literacy and combined primary, secondary and tertiary gross enrolment.
These two indices are combined to create the education index, with 2/3 weight given to adult literacy and 1/3 weight to combined gross enrolment.
E.g. Adult literacy index = = Gross enrolment index = 69-0 = Education index = 2/3(0.958) + 1/3(0.69) = 0.869

16. Calculating the GDP index
Is calculated using adjusted GDP per capita (PPP US$).
Income serves as a surrogate for all the dimensions of human development not reflected in a long and healthy life and in knowledge.
It is adjusted because achieving a respectable level of human development does not require unlimited income.
E.g. GDP index = log(8,840)-log(100) = log(40,000)-log(100)

17. Calculating HDI Once the dimension indices have been calculated…
E.g. HDI = 1/3(life expectancy index) /3(education index) /3(GDP index) = 1/3(0.883) + 1/3 (0.869) /3(0.748) = 0.833

18. Human Development Classification
HDI of or above  high human development
HDI of  medium human development
HDI of less than  low human development

19. The Relationship between Unemployment rate and HDI

20. Samples Unemployment rate from IFS
Samples only include countries both have unemployment rate and HDI value
Total: 81 observations

21. Regression Result

22. ^
Unemployment rate
= *** ***HDI
se (4.5251) (5.3595)
R2 = N=81 SER=

24. Negative relationship
When the HDI value reduce to zero, the unemployment rate will be
When the HDI value increase 1 unit, the unemployment rate will decrease

25. Cross-sectional data
The R squared shows that only 17% of the total variation in unemployment rate can be explained by the variations in HDI

26. P-value is 0.0001 of the coefficient of HDI, smaller than any level of significance
The coefficient of HDI is significantly different from zero

27. Human Development Report 2007/2008

33. HDI Trend

37. Hong Kong VS Asian Countries

38. Hong Kong
Japan
Singapore
HDI
0.937
(21)
0.953
(8)
0.922
(25)
Life expectancy index
0.949
(2)
0.964
(1)
0.907
(14)
Education Index
0.885
(73)
0.946
(42)
0.908
(47)
GDP Index
0.977
(7)
0.959
(17)
0.950
(19)

39. HK may have to improve the education index
Improve the degree of adult’s literacy
Enrolment ratio for primary, secondary and tertiary education
Total public expenditure on education
Primary: Japan(38%), HK(26%)
Secondary and post secondary: Japan(40%), HK(36%),Singapore(43%)

40. Limitations of HDI

41. A simple single index cannot show everything
The HDI only reflects average achievements in three basic aspects of human development – leading a long and healthy life, being knowledgeable, and enjoying a decent standard of living.
A fuller picture of a country's level of human development requires analysis of other human development indicators and information, for example gender-related development index, gender empowerment measure, and human poverty index.
Still, not enough to understand a country's level of human development

42. Abstract concept of Human Development
Human development can refer to anthropological, sociological, economic and psychological approaches to examining human development in context
is about creating an environment in which people can develop their full potential and lead productive, creative lives in accord with their needs and interests.
is about “enlarging people’s choices”
HDI only includes three aspects

43. HDI does not include all countries in the world
Not all countries have sufficient data available to calculate the HDI or other indices
They have many data gaps in basic areas of human development
Mostly relative backward countries are not included
HDI cannot reveal a fuller picture of a backward country’s level of human development

44. Data for HDI come from…
The primary source of data is regarded an essential element to value an index’s accuracy
HDRO does not collect data directly from countries or make estimates to fill these data gaps in the Report
Data are mostly provided from the relevant international data agencies (the United Nations Population Division for life expectancy at birth, the UNESCO Institute for Statistics for the adult literacy rate and combined gross enrolment ratio for primary, secondary and tertiary schools and the World Bank for GDP per capita [PPP US$])
But a significant number of countries data are missing for one or more of these components, for example countries ranked no.1-19 miss adult literacy rate so the rate is assumed to be 99.0%.
HDRO may use outdated data in estimation, for example the adult literacy rate of Hong Kong(94.6%) using in the calculation is estimated from UNESCO (United Nations Educational, Scientific and Cultural Organization) Institute for Statistics in 2003 (already outdated)
HDRO attempts to make an estimate in consultation with regional and national statistical offices or other experts  subjective data