measurement of human development using composite indices, claes johansson

8/3/2019 Measurement of Human Development Using Composite Indices, Claes Johansson

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The Human Development

IndicesOxford, Sep 14 2004

Claes Johansson

United Nations Development Programme

Human Development Report Office


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The Human

Development Indices The HDI (Human Development Index)

- a summary measure of human development

The GDI (Gender-related Development Index)

- the HDI adjusted for gender inequality

The GEM (Gender Empowerment Measure)- Measures gender equality in economic and political

participation and decision making

The HPI (Human Poverty Index)

- Captures the level of human poverty


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The dimensions and indicators of the

HDI

HDI has three dimensions, measured by

one or two indicators each:

Leading a long and healthy life

Life expectancy at birth

Education

Adult literacy rate

Gross primary, secondary and tertiaryenrolment

A decent standard of living

GDP per capita (PPP US$)


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What dimensions to include

The concept of human development hasmany dimensions

Health, education and standard of livingare dimensions that are basic and can be

measured Proposed additions either are hard to

measure or overlap with existingdimensions - Examples: political

freedom, environment, child mortality

HD can never be captured in singleindicator!


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Combining indicators for the HDI

In order to create the HDI, goalposts

are chosen for each indicator

Using goalposts rather than observedminima and maxima allows comparisons

over time

Set with the timeframe 1960-2050 Also set to allow for disaggregation

some subgroups can have lower values

than observed in country data


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Goalposts for calculating the HDI

Indicator Minimum value Maximum value

Life expectancy 25 years 85 years

Adult literacy 0% 100%

Gross enrolment 0% 100%

GDP per capita 100 (PPP US$) 40,000 (PPP US$)


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Calculating the HDI

Dimensions:

Indicators:

Dimension

index

A long and

healthy life

Life

Expectancy

Life

Expectancy

Index

Being

Knowledgeable

Literacy &

Enrolment

Education

Index

A decent

standard

of living

GDP

per capita

GDP

Index

The HDI


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25 years

85 years

0

1

41.4

Life

expectancy

index

0.27

100%

0%

78.1 0.68

Literacy(2/3)

Enrolment(1/3)

49

0% 0

100% 1

Education indexIncome

index

40,000

100

0.34780

0

1

(log scale)

HDI1

0

0.433

0.27 + 0.68 + 0.34

3

= 0.433

Calculating the HDI: an example (Zambia)


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The weights in the HDI

The three dimensions in the HDI health, education, standard of living

weighted equally Equal weighting is not an accident;

reflects a belief that all three are equallyimportant

Assumption of substitutability central,but sometimes forgotten

Changing the weighting, even

drastically, maintain


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Changing weights what would happen?

How sensitive is the HDI to changing weights?

Not very: for the full set of countries, thecomponents are highly correlated

Does not implicate redundancy: in sub-groups,large differences in how income is translated intoother dimensions

Life

expectancy

Education GDP

Life

expectancy

- 0.74 0.78

Education - 0.75

GDP -


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Average absolute rank change with

changing weights

1 23 4

5 67

89

10

Life expectancyGDP

Education

0

2

4

6

8

10

12

14

Average

absolute

rank

change

Higher weight


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Correlation with the HDI with

increasing weights by subcomponent

12

3 4 56

78

910

Life expectancyGDP

Education

0.91

0.92

0.93

0.940.95

0.96

0.97

0.98

0.99

1

CorrelationwithHDI

Weight awarded


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Why include GDP per capita?

GDP per capita included as a proxy for a

decent standard of living

Reflects a number of issues notexplicitly included: the expanding

choices available in many areas with

increasing income Logarithm of GDP is used reflects

diminishing return in expanding choices


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Critiques of the HDI

Critiques

Are these all the dimensions of HD?

Are these indicators good measures of

the dimensions?

What about inequality?

Can it capture policy changes?

Ranking countries unknown

uncertainties Why cap values?

Why have an index at all?


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Critiques, cont.

What about future generations an

environmental degradation component?

Political freedoms and rights? Culture

Nutritional status

Uncertainty

Personal security

Missing components


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Critiques incorporated in the HDI

Absolute maximum and minimum

values for each indicator

Supplementing literacy with a secondeducation indicator

Changing the adjustment of GDP per

capita

Critiques that have been incorporated


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Political freedom

Political freedom index (PFI) presented

in HDR 1991

Meant to be incorporated in the HDI Caused technical and political

controversy

Ultimately dropped because of thedifficulties of measurement


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Literacy

Conceptually and practically limited

Definition and collection of literacy varieswidely from country to country

Culturally specific: script systems and other

factors vary across the world

UNESCO Institute of Statistics LAMP

programme

Key data problems


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GDP per capita (PPP US$)

Based on the ICP programme, limited to

some 60 countries Based on regressions for other countries

Imperfect measure but certainly better than

exchange rate terms

Life expectancy

Should measure long and healthy life but

does not take into account health, just

length

Key data problems, cont.


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Staying power of the HDI

HDI has become one of the best known

and most used indicators of

development. Despite some remaining controversies,

broadly accepted and used by media,

policymakers and academics What factors likely contributed?

Why has the HDI been successful?


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Staying power of the HDI

Underpinned by four aspects:

Conceptual clarity that facilitates its power

as a tool of communication Reasonable level of aggregation

Use of universal criteria and variables

Use of standardized international data

explicitly designed for comparison

Policy relevance, and acceptability


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Specification of the HDI derived from a

clearly defined concept:

Dimensions and variables correspond to theconcepts of human development

Meaning of variables intuitively

understandable

Conceptual clarity


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Reasonable level of aggregation

HDI focuses on a set of universally -

applicable core issues

Aggregating too many issues tends tocompromise analytical usefulness and

policy relevance

Separate indices for e.g. genderempowerment, human poverty


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Universally-relevant concepts and

variables

High degree of consensus that more isbetter in each of the variables

In contrast with e.g. election frequency,

voter turnout, share of largest party


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Uses data that are legitimized through

the international statistical system

Of course, still data problems but data havebeen standardized to ensure inter-country

comparability


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Appropriate uses of the HDI

Ordinal vs. cardinal HDI value has a

meaning but it is not intuitive and should

be used carefully Ranking

Example: reversals in HDI? Arguably

meaningful exercise, if weights areaccepted


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Other indices

Whereas HDI measures average

achievement, the HPI measures

deprivations Separate indices for developing

countries (HPI-1) and high-income

OECD countries (HPI-2)

The Human Poverty Indices (HPI-1 and

HPI-2)


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Other indices

HDI and GDI focus on national averages

(conglomerative aspect)

HPI focuses on the worst off(deprivationalaspect)

The deprivational perspective


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Other indices

Distinguishing between developing and

OECD countries recognized the relative

nature of poverty Allows the use of richer, more

appropriate data

Different deprivations are more relevantin different contexts

Why separate indices


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Other indices

The Human Poverty Index for developing

countries (HPI-1)

Dimensions: Indicators:A long and healthy

life

Probability at birth of not

surviving until age 40

Knowledge Adult illiteracy rate

A decent standard Access to safe water and

children underweight for age


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Other indices

The Human Poverty Index (HPI-1)

Where:

P1=Probability of not surviving to age 40 (times 100)P2=Adult illiteracy rateP3= Average of people without access to safe water and children

underweight

As E rises greater weight is given to the dimension in

which there is most deprivation. E=1 implies simple

average (perfect substitutability), E= tsets HPI =highest value (no substitutability). In he global HDR

E=3, giving additional but not overwhelming weight to

areas of most acute deprivation

EEEE /1

321 )](3/1[ PPPHPI !


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E in the HPI formula

As E rises greater weight is given to the

dimension in which there is most deprivation.

E=1 implies simple average (perfectsubstitutability),

E= HPI = highest value (no substitutability).

In the global HDRE=3, giving additional butnot overwhelming weight to areas of most

acute deprivation


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Other indices

The Human Poverty Index for OECD

countries (HPI-2)

Dimensions: Indicators:A long and healthy

life

Probability at birth of not

surviving until age 60

Knowledge Functional illiteracy rate

A decent standard

Social exclusion

Relative income poverty

Long-term unemployment


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Other indices

The Human Poverty Index (HPI-2)

Where:

P1=Probability of not surviving to age 60 (times 100)P2=Functional illiteracy rateP3=Relative income poverty (population below 50% median

income)

P4 = Long-term unemployment

As E rises greater weight is given to the dimension in

which there is most deprivation. In the global HDRE=3,

giving additional but not overwhelming weight to areas

of most acute deprivation

EEEEE /1

4321 )](4/1[ PPPPHPI !


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Other indices

The Gender-related development Index

(GDI)Same components as the HDI

After calculating dimension index for each

sex they are combined in a way to penalizegender equality (equally distributed index)

The GDI is calculated by taking the

unweighted average of the three equallydistributed indices


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Other indices

The Gender-related development Index

(GDI)

Formula for the equally distributed index:

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1

)]}.(..[)].(..{[

indexmalesharepopmaleindexfemalesharepopFemale

determines the size of gender equality in a

society. In the global HDR it is set at 2.


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Goalposts for calculating the GDI

Other indices

Indicator

Life expectancy

Female 27.5 years 87.5 years

Male 22.5 years 82.5 years

Adult literacy 100% 0%

Gross enrolment 100% 0%

GDP per capita $40,000(US) $100(US)

Maximum

Value

Minimum

value


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Other indices

The GenderEmpowerment Measure

Dimensions: Indicators:

Political participation

and decision making

Share of parliamentary seats

Economic participationand decision making

Share of positions aslegislators, senior officials and

managers; and profesional

and technical workers

Power over economic

resources

Share of estimated earned

income


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Other indices


Calculate dimension index and equallydistributed equivalent percentage (EDEP)

for each dimension (like GDI)

For political and economic decisionmaking divide EDEP by 50 (the ideal share

women should have)

N.B. For political and economic decisionmaking EDEP can be calculated directly

(as indicators are already %)


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Other indices

Income is not logged in the calculationof the income index.

Again = 2, for moderate penalisation

of inequality



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Discrimination through the lens of the

HDI

Life

expectancy

Literacy

Income

measurement of human development using composite indices, claes johansson

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