Human Development Index (HDI)
•
•
The Human Development Index is published by the UNDP and focuses on longevity, basic
education and minimal income. It tracks progress made by countries in improving these three
outcomes.
The inclusion of education and health indicators is a sign of successful government policies in
providing access to important merit goods such as health care, sanitation and education.
1. Knowledge: First an educational component made up of two statistics – mean years of schooling
and expected years of schooling
2. Long and healthy life: Second a life expectancy component is calculated using a minimum value
for life expectancy of 25 years and maximum value of 85 years.
3. A decent standard of living: The final element is gross national income (GNI) per capita
adjusted to purchasing power parity standard (PPP).
The UNDP classifies each country into one of three development bins:
•
•
•
Low human development for HDI scores between 0.0 and 0.5,
Medium human development for HDI scores between 0.5 and 0.8
High human development for HDI scores between 0.8 and 1.0.
Important note:
GNI is now used rather than GDP because of the growing size of remittances in the global economy and
also the importance of international aid payments. For example, because of remittances from abroad, GNI in
the Philippines greatly exceeds GDP
Log of income is used in the HDI calculation because income is instrumental to human development but
higher incomes are assumed to have a declining contribution to human development
The Global Human Development Map for 2011
GNI per Capita - Purchasing Power Parity (PPP)
This is a method of currency valuation based on the idea that two identical goods in different countries
should eventually cost the same. This is illustrated by the Big Mac index, which takes a Big Mac hamburger
and compares its prices in different countries in order to establish the relative value of their currencies. If
PPP holds true, then you can buy the same goods and services with £100 in London as you can in Glasgow,
New York and Cape Town. There are many reasons why this will not be the case!
© Tutor2u Limited 2012/13
www.tutor2u.net
Currency speculation can make
currencies volatile
Differences in the range of products
available
Limitations of PPP
exchange rates
Different indirect taxes and subsidies
Variations in strength of competition
Human Development Index for 2010
A selection of data drawn from the Human Development Index is provided in the table below.
Country
GNI per capita
(2008 US$PPP)
Norway
Australia
United States
Ireland
Canada
Sweden
Germany
Japan
Korea (Republic of)
France
Spain
Greece
Italy
United Kingdom
Hungary
Poland
Chile
Mexico
Russian Federation
Brazil
China
Sri Lanka
Thailand
South Africa
India
Kenya
Bangladesh
Nigeria
Côte d'Ivoire
Ethiopia
Sierra Leone
Niger
Zimbabwe
© Tutor2u Limited 2012/13
58,809
38,691
47,093
33,077
38,668
36,936
35,308
34,692
29,517
34,340
29,661
27,580
29,619
35,087
17,472
17,803
13,561
13,971
15,258
10,607
7,258
4,886
8,000
9,812
3,337
1,627
1,587
2,156
1,624
992
808
675
176
HDI value
0.938
0.937
0.902
0.895
0.888
0.885
0.885
0.884
0.877
0.872
0.863
0.855
0.854
0.849
0.805
0.795
0.783
0.750
0.719
0.699
0.663
0.658
0.654
0.597
0.519
0.470
0.469
0.423
0.397
0.328
0.317
0.261
0.140
Inequalityadjusted HDI
value (IHDI)
0.876
0.864
0.799
0.813
0.812
0.824
0.814
Not available
0.731
0.792
0.779
0.768
0.752
0.766
0.736
0.709
0.634
0.593
0.636
0.509
0.511
0.546
0.516
0.411
0.365
0.320
0.331
0.246
0.254
0.216
0.193
0.173
0.098
www.tutor2u.net
Life expectancy
at birth (years)
81.0
81.9
79.6
80.3
81.0
81.3
80.2
83.2
79.8
81.6
81.3
79.7
81.4
79.8
73.9
76.0
78.8
76.7
67.2
72.9
73.5
74.4
69.3
52.0
64.4
55.6
66.9
48.4
58.4
56.1
48.2
52.5
47.0
Mean years of
schooling (of
adults) (years)
12.6
12.0
12.4
11.6
11.5
11.6
12.2
11.5
11.6
10.4
10.4
10.5
9.7
9.5
11.7
10.0
9.7
8.7
8.8
7.2
7.5
8.2
6.6
8.2
4.4
7.0
4.8
5.0
3.3
1.5
2.9
1.4
7.2
Note: IHDI: Inequality-adjusted HDI (a new measure introduced into 2010 Human Development Report)
Uneven progress but deep inequalities
•
•
•
•
•
•
The world average HDI rose to 0.68 in 2010 from 0.57 in 1990, continuing the upward trend from
1970, when it stood at 0.48
The fastest progress has been in East Asia & the Pacific, followed by South Asia and Arab States.
All but 3 of the 135 countries have a higher level of human development today than in 1970
The exceptions are the Democratic Republic of the Congo, Zambia and Zimbabwe
From 1970 to 2010 real per capita income in developed countries increased 2.3 percent a year on
average, compared with 1.5 percent for developing countries
The real average income of people in 13 countries in the bottom quarter of today’s world income
distribution is lower than in 1970
Progress in reducing extreme poverty
© Tutor2u Limited 2012/13
www.tutor2u.net
Limitations of the Human Development Index
•
The HDI notably fails to take account of qualitative factors, such as cultural identity and political
freedoms (human security, gender opportunities and human rights for example).
•
Many argue that the HDI should become more human-centred and expanded to include more
dimensions, ranging from gender equity to environmental biodiversity
•
The GNP per capita figure – and consequently the HDI figure – takes no account of income
distribution. If income is unevenly distributed, then GNP per capita will be an inaccurate measure of
the monetary well-being of the people. Inequitable development is not human development.
•
PPP values change very quickly and are likely to be inaccurate or misleading
•
The 2010 edition of the Human Development Report marked the launch of a new Inequalityadjusted HDI and also a Gender Inequality Index and a Multidimensional Poverty Index
•
Inequality HDI - The average loss in the HDI due to inequality is about 23 percent—that is, adjusted
for inequality, the global HDI of 0.682 in 2011 would fall to 0.525.
Key point: the HDI is intended to allow economists to draw broad conclusions about which countries enjoy
relatively high standards of living, and which are, by comparison, under-developed.
© Tutor2u Limited 2012/13
www.tutor2u.net
Life Expectancy at
Birth (years)
Are there diminishing returns from higher per capita
incomes in terms of improving life expectancy?
Income (GDP) per capita
The Multi-Dimensional Poverty Index (MDPI)
The Multidimensional Poverty Index was first introduced in 2010 and it an attempt designed to illustrate the
many deprivations faced by the most severely disadvantaged. The MPI requires a household to be deprived
in multiple indicators at the same time. A person is multi-dimensionally poor if the weighted indicators in
which he or she is deprived add up to at least 33%. The MPI is closely linked to the Millennium Development
Goals targets and includes ten components:
1.
2.
3.
4.
5.
6.
7.
Possession of some assets
Nutrition
Child mortality
Access to drinking water
Access to sanitation
Access to a safe room
Access to electricity
© Tutor2u Limited 2012/13
www.tutor2u.net
8. Access to an improved cooking oil
9. Years of schooling
10. Children enrolled in school
© Tutor2u Limited 2012/13
www.tutor2u.net