Transcript Slide 1

Measures for Evolving Reality:
NEW HUMAN DEVELOPMENT INDEX
Milorad Kovacevic
Human Development Report Office, UNDP
Workshop on HD Approach and Measurement for the GCC
States, Doha, 9-11 May, 2011
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Measures for Evolving Reality:
NEW HUMAN DEVELOPMENT INDEX
Doha, Qatar, 9-11 May
Workshop on HD Approach and Measurement for the GCC States, Doha, 9-11 May, 2011
Human development and its measurement
Several important steps
Conceptual:
How to define human development?
Operational:
How to observe and measure its components and
determinants?
How to aggregate the different indicators to obtain a
commonly acceptable single index of human development in
order to measure its changes?
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Human development and its measurement
A standard definition of human development as
“a process of enlarging people’s choices. The most critical
ones are to lead a long and healthy life, to be educated and to
enjoy a decent standard of living.”
A broader definition (2010 HDR):
“Human development is the expansion of people’s freedoms
to live long, healthy and creative lives; to advance other goals
they have reason to value; and to engage actively in shaping
development equitably and sustainably on a shared planet”
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Principles
At the onset there were six basic principles (Ul Haq, 1998)
The HDI should
1. Measure the basic concept of human development to
enlarge people’s choices;
2. include a limited number of variables to keep it simple and
manageable;
3. be a composite rather than a plethora of separate indices;
4. cover both social and economic choices;
5. be sufficiently flexible in both coverage and methodology;
6. not be inhibited by lack of reliable and up-to-date data
series.
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INDICATORS
AGGREGATION
HDI
Measurements, methods, quality
Theories, Concepts
Human development and its measurement
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Definition of 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 income.
The HDI was recognized from the onset as simple and
crude
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20th anniversary of measuring the human
development
• Measuring is as relevant as ever
• Quantifying and describing our changing world
• Finding ways of improving people’s well-being
• Human development is an evolving idea
• As the world changes – analytical tools change
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HDI Indicator Criteria
Inherent and statistical criteria
o
o
o
o
Conceptual relevance
Value-added
Capturing a “quality” aspect
A possibility of having a distribution over households or
individuals
Practical and data related
o
o
o
o
“Reasonable” country coverage (preferably >170)
Past time-series preferred
Future “regular” updates required
Power of discrimination (especially at top and bottom of HDI)
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Potential HDI Indicators
LONG AND HEALTHY LIFE
ACCESS TO KNOWLEDGE
• Health-Adjusted Life Expectancy (HALE)
• Malnourishment of
Children under 5
Total population
• Survival rate to age 5
• Life expectancy at birth (LE)
• Mean years of schooling of adults
• Life expectancy at age 10 or 15
• Educational attainment (of adults)
(secondary and higher)
• School life expectancy (of children)
• Gross enrolment ratio (secondary &
tertiary)
• (Gross) Primary completion rate
STANDARD OF LIVING ($PPP)
• GDP per capita
• GNI per capita
• Household consumption per capita
• Total consumption:
(household + Government) per capita
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Change of indicators
• Adult literacy:
-
-
not sufficient for 21st century
does not discriminate between developed countries
• Mean years of schooling for adults (the highest grade attained) is
a better measure of human capital
• Expected years of schooling for a child of the school entrance age
is another way of expressing the GER.
•
GDP is the monetary value of goods and services produced in a country irrespective of
how much is retained in the country
• GNI expresses the income accrued to residents of a country,
including some international flows and excluding income
generated in the country but repatriated abroad.
• Gross national income better reflects income available to people
within a country
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Dimensional indices
Scaling (Normalization)
• Necessary for comparability on the same scale.
• Only after rescaling they can be combined into a single scalar
– a composite index.
• Enable each dimension index to range between 0 and 1
𝐼𝑥 = 𝐼 𝑥𝑐 , 𝑚𝑥 , 𝑀𝑥
𝑥 − 𝑚𝑥
=
𝑀𝑥 − 𝑚𝑥
𝐼𝐿𝐸 , 𝐼𝑀𝑌𝑆 , 𝐼𝐸𝑌𝑆 , 𝐼ln(𝐺𝑁𝐼)
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Dimensional indices
Minima/Maxima (goalposts): Observed maxima and natural
minima since 1980
Indicator
Life expectancy
Observed maximum
83.2
(Japan, 2010)
Mean years of schooling
13.2
(United States, 2000)
Expected years of schooling 20.6
(Australia, 2002)
Combined education index 0.951
(New Zealand, 2010)
Per capita income (PPP US$) 108,211
(United Arab Emirates,
1980)
Minimum
20.0
0
0
0
163
(Zimbabwe,
2008)
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Functional form: Aggregation
𝐻𝐷𝐼𝑜𝑙𝑑
Old HDI: arithmetic mean
1
1 2
1
1
= 𝐼𝐿𝐸 +
𝐼𝑀𝑌𝑆 + 𝐼𝐸𝑌𝑆 + 𝐼ln(𝐺𝑁𝐼)
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3 3
3
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• Perfect substitutability:
– a low achievement in one dimension is not anymore
linearly compensated for by high achievement in another
dimension.
Ex. (0.5, 0.6, 0.7)HDI=0.6, (0.4, 0.6, 0.8) HDI=0.6
• Changing of minima and maxima impacts the rankings by
HDI
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Functional form: Aggregation
New HDI: geometric mean
𝐻𝐷𝐼 = (𝐼𝐿𝐸 )1/3 [
1
1
𝐼𝑀𝑌𝑆 2 (𝐼𝐸𝑌𝑆 )2 ]1/3 (𝐼ln(𝐺𝑁𝐼) )1/3
• No perfect substitutability reduced substitutability.
• Ex. (0.5, 0.6, 0.7)HDI=0.594, (0.4, 0.6, 0.8) HDI=0.577
• Awards round performance
• Changing of maxima does not impact ranking by HDI
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Other similarities and differences
• Equal weighting (normative)
• Logarithmic transformation of income – diminishing
return principal
• No capping of income by $40,000
• Equal weighing of educational subindices
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Comparison of HDI - new vs. old form
VERY HIGH HD
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0.9
Estonia
HIGH HD
MEDIUM HD
0.7
0.6
-
0.5
0.4
LOW HD
HDI 2010, new aggregation
0.8
0.3
LOW HD
0.2
0.2
0.3
MEDIUM HD
0.4
0.5
0.6
HIGH HD
0.7
0.8
VERY HIGH HD
0.9
1
HDI 2010, old aggregation
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Other related changes and properties
• Grouping of countries to four quartile groups:
Very High HD, High HD, Medium HD, Low HD
• Relative boundaries, relative ranking
• HDI values are not comparable across additions of
HDR due to data revisions and possible changes in
maxima
– Each HDR has a table with calculated HDI
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Summary of added values
• Uses more discriminating indicators
• Rewards balanced performance: countries cannot
fully compensate for poor performance in one
dimension by another
• Normalization based on actual values
• When maxima change the ranks of countries are
preserved due to the multiplicative form of the new
HDI.
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Human Development Index
HDI Category:
NA
LOW
MEDIUM
HIGH
VERY HIGH
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Very few critiques
Ravallion (2011) argues “Implicit Tradeoffs in the HDI seem
unreasonable”
“An extra year of life expectancy much more valuable in
monetary terms for rich versus poor countries”
• Implicit tradeoffs are embedded in the HDI by the implicit
weights and the aggregation formula.
• Tradeoffs refer to
– the amount that must be given up of a component in order to
achieve an extra unit of another component holding the same level
of overall HDI.
• In economics, that’s called the Marginal Rate of Substitution.
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Very few critiques
A simple reply is
• The HDI is not a welfare function to be maximised.
It does not encompasses all the development aims.
It should be seen merely as index of capabilities.
• The HDI is an ordinal measure for relative ranking
among countries
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What does the HDI tell us?
• People and their capabilities should be the ultimate
criteria for assessing the development of a country,
not economic growth alone.
• It can also be used to question national policy
choices, asking how two countries with the same
level of GNI per capita can end up with such
different human development outcomes.
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What does the HDI tell us?
• Example:
• Saudi Arabia has GNI per capita more than $2000 higher
than Czech Republic, but life expectancy and expected
years of schooling differ greatly between the two
countries.
 Czech Republic is much higher ranked than Saudi Arabia.
• These striking contrasts can directly stimulate debate about
government policy priorities.
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Implications for the future
• The main problem at the global level:
– the lack of appropriate data and insufficient
data quality of international databases, persists
over time.
• Nonetheless, over the last 20 years there was a
considerable improvement in all aspects of relevant
measuring of socio-economic and environmental
phenomena.
• Still, a long way to go!
• Continuous investment in data and their efficient
use are needed.
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Thank you
[email protected]
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