Human Development Index HDI
Lecture on the 12th of December
What is the HDI
The HDI – human development
index – 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
HDI
• HDI measures the average achievements of
a country in three basic dimensions of human
development:
 a long and healthy life
 access to knowledge and
 a decent standard of living.
The HDI is the geometric mean of normalized
indices measuring achievements in each dimension
What is the HDI
The HDI ranks countries by level of
"human development" and
separates countries by 3 groups:
 developed (high development)
 developing (middle development)
 underdeveloped (low development)
What is the HDI
• HDI is a way of measuring development by
combining indicators of life expectancy,
educational attainment and income into a
composite index. The breakthrough for the
HDI was the creation of a single statistic
which was to serve as a frame of reference
for both social and economic development
Components of HDI – three
dimensions and four indicators
Components of the HDI
Health is measured by life expectancy at birth.
Education is measured by a combination of its
average and expected duration.
Living standards are measured by GNI per
capita (in purchasing power parity, PPP
US$)
What is the HDI
The index is composed from
statistics for Life Expectancy,
Education and GNI collected at the
national level using special
formulas
Origins of the HDI
The origins of the HDI are to be found in
the
United
Nations
Development
Programme's UNDP Human Development
Reports HDRs. These were devised and
launched by Pakistani Economist Mahbub
ul Haq (February 22, 1934 - July 16, 1998)
in 1990 and had the explicit purpose: ‘‘to
shift the focus of development economics
from national income accounting to people
centered policies’’ [1
Mahbub ul Haq
Mahbub ul Haq
Mahbub ul Haq was an influential Pakistani
economist. One of the founders of human
development theory, he created the HDI,
used since 1993 by the United Nations
Development Programme in its annual
reports. He also served as the World Bank's
director of policy planning (1970-1982) and
headed Ministry of Finance of the
Government of Pakistan and was Minister
of finance and planning (1982-1984)
Mahbub ul Haq
Mr. Haq founded Human Development
Centre, Pakistan in 1996.
==
His selected works:
*The Strategy of Economic Planning (1963)
*The Poverty Curtain (1976)
*Reflections on Human Development (1995)
Mahbub ul Haq
To produce the HDRs, Haq brought together a
group of well known development
economists
including:
Paul
Streeten,
Frances
Stewart,
Gustav
Ranis, Keith Griffin, Sudhir Anand,
and Meghnad Desai. But it was Amartya
Sen’s work on capabilities and functionings
that provided the underlying conceptual
framework
Amartya Sen
Amartya Sen
Amartya Sen
Amartya Sen
Amartya Kumar Sen (Bengali : অমর্ত্য কুমার
সেন, Ômorto Kumar Shen; born 3 November
1933) is an eminent Indian economist. He is
currently the Thomas W. Lamont University
Professor and Professor of Economics and
Philosophy at Harvard University. He is also a
fellow of Trinity College at the University of
Cambridge, where from 1998 to 2004 he was
Master, the first Indian academic to head
an Oxbridge college
Amartya Sen
In 1998, Sen won the Nobel Memorial Prize
in Economics for his contributions to work
on welfare economics.
He is known as "the Conscience of
Economics” for his work on famine, human
development theory, welfare economics, the
underlying mechanisms of poverty, gender
inequality, and political liberalism
Amartya Sen
Amartya Sen's books have been translated
into more than thirty languages. He is a
trustee of Economists for Peace and
Security. He has received over 80 honorary
doctorates. In the year 2010, Time
magazine listed him among the 100 most
influential persons in the world
Mahbub ul Haq
Haq was sure that a simple composite
measure of human development was needed
in order to convince the public, academics,
and policy-makers that they can and should
evaluate development not only by economic
advances but also by improvements in
human well-being. Sen initially opposed
this idea, but he went on to help Haq
develop the HDI
HDI
Sen was worried that it was difficult to
capture the full complexity of human
capabilities in a single index but Haq
persuaded him that only a single number
would shift the attention of policy-makers
from concentration on economic to human
well-being
Methodology
• The HDI sets a minimum and a maximum
for each dimension, called goalposts, and
then shows where each country stands in
relation to these goalposts, expressed as a
value between 0 and 1. Minimum and
maximum values need to be set in order to
transform the indicators into indices
between 0 and 1
Methodology
• To transform a raw variable, say x, into a unitfree index between 0 and 1 (which allows
different
indices
to
be
multiplied),
the formula from the next slide is used:
Methodology
x-index =
x  xmin
,
xmax  xmin
where xmin , xmax are the lowest and highest
values the variable x can attain, respectively
HDI Calculation
• The HDI is the geometric mean of the three
dimension indices:
HDI  LEI * EI * II
3
Methodology
The HDI then represents the uniformly geometric average of
the following factor indices:
• Life Expectancy Index LEI
• Education Index EI
 Average years of education MYSI (mean years of
schooling index)
 Estimated years of education or EYSI (estimated years of
schooling index)
• Real GNI per capita Index II (income index)
Goalposts for HDI in 2013 Report
Indicator
Observed maximum
Life expectancy (years) 85
Minimum
20
Mean years of
schooling
15
0
Expected years of
schooling
18
0
GNI per capita (PPP $) 75,000
100
Life Expectancy LE
LE is the expected (in the statistical sense)
number of years of life remaining at a given
age. It is denoted in the Life Table by ex,
which means the average number of
subsequent years of life for someone now
aged
x,
according
to
a
particular mortality experience
Life Expectancy LE
LE is usually calculated separately for males and
females. Females live longer than males in
countries with modern obstetric care.
In countries with high infant mortality rates, the
life expectancy at birth is highly sensitive to
the rate of death in the first few years of life.
Another measure such as life expectancy at age
5 (e5) can be used to exclude the effect of
infant mortality to provide a simple measure of
overall mortality rates other than in early
childhood
Life Expectancy Index LEI
• The life expectancy at birth component of
the HDI is calculated using a minimum
value of 20 years and maximum value of 85
years
Life Expectancy Index LEI
• Life Expectancy Index =
LE  20
85  20
• The Life Expectancy Index is a statistical
measure used to determine the average
lifespan of the population of a certain nation
or area. Life expectancy is also a factor in
finding the physical quality of life of an
area
Life Expectancy Index LEI
• Thus, the LE component for a country
where life expectancy at birth is 55 years
would be 0.550
55  20
LEI 
85  20
35
LEI 
 0.412
65
Education Index
• The education Index is measured by mean of
years of schooling for adults aged 25 years and
expected years of schooling for children of school
going age. Mean years of schooling is estimated
based on duration of schooling at each level of
education. Expected years of schooling estimates
are based on enrolment by age at all levels of
education and population of official school age for
each level of education
Education Index EI
MYSI  EYSI
EI 
2
where
MYS  0
MYSI 
15  0
EYS  0
EYSI 
18  0
Real GNI per capita Index II
• The decent standard of living component is
measured by GNI per capita (PPP US$).
The HDI uses the logarithm of income, to
reflect the diminishing importance of
income with increasing GNI. For the wealth
component, the goalpost for minimum
income is $100 (PPP) and the maximum is
$ 75000 (PPP)
Real GNI per capita Index II
ln GNI PC  ln100
II 
ln 75000  ln100
HDI
• The HDI facilitates instructive comparisons
of the experiences within and between
different countries
• Reference:
• http://hdr.undp.org/en/humandev/