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  1. 1. Measuring Social andEconomic Development1 Wali Memon 2006A Look at the Human Development Index (HDI)
  2. 2. Understanding Indexes What is an index? An index is a composite of indicators that produces a single calculation which can then be ranked. Let’s look at some examples!!2 Wali Memon 2006
  3. 3. The Body Mass Index3 Wali Memon 2006
  4. 4. The Wind Chill Index4 Wali Memon 2006
  5. 5. The Big Mac Index5 Wali Memon 2006
  6. 6. Other Common Indexes6 Wali Memon 2006
  7. 7. Economic & Social Indexes Economic and social indexes are like those we just talked about except they include economic and social data (such as income,7 educational attainment, health, etc.) rather 2006 Wali Memon than wind speeds, body weight, and the like.
  8. 8. The Human Development Index (HDI) …is the best known composite index of social and economic well- being…8 Wali Memon 2006
  9. 9. The Concept of Human Development "The basic purpose of development is to enlarge peoples choices. In principle, these choices can be infinite and can change over time. People often value achievements that do not show up at all, or not immediately, in income or growth figures: greater access to knowledge, better nutrition and health services, more secure livelihoods, security against crime and physical violence, satisfying leisure hours, political and cultural freedoms and sense of participation in community activities. The objective of development is to create an enabling environment for people to enjoy long, healthy and creative lives."9 Wali Memon 2006 Mahbub ul Haq -- Founder of the Human Development Report
  10. 10. How the UNDP Measures Human Development • The HDI consists of three equally weighted components: (1) “A long and healthy life” (Health) (2) “Knowledge” (Education) (3) “A decent standard of living” (Wealth)10 Wali Memon 2006
  11. 11. Deconstructing Each Measure Each component of the HDI is measured in the following way: Health Measured by life expectancy at birth. Education Measured as a combination of adult literacy (with two-thirds weight) and gross enrollment (with one-third weight). Wealth Measured by GDP per capita.11 Wali Memon 2006
  12. 12. Calculating HDI: The United States In the United States, in 2005: The average life expectancy was 77.9. The adult literacy rate was 99%. The gross enrollment rate was 93.3%. The GDP per capita was $41,890. The HDI was .951. The HDI ranking was 12th.12 Wali Memon 2006
  13. 13. U.S. HDI = .95113 Wali Memon 2006
  14. 14. The IMF’s GDP Per Capita Rankings (2006) Purchasing Power Parity (PPP) 1 Luxembourg ($80,471) 11 United Kingdom ($35,051) 2 Ireland ($44,087) 12 Finland ($34,819) 3 Norway ($43,574) 13 Belgium ($34,478) 4 United States ($43,444) 14 Sweden ($34,409) 5 Iceland ($40,277) As you 15 Qatar ($33,049) can see here, 6 Switzerland ($37,369) 16 Australia ($32,938) States has the the United 7 Denmark ($36,549) 17 fourth highest GDP per capita Singapore ($32,867) in the world. The question is: 8 Austria ($36,031) 18 Japan ($32,647) how well is the United States 9 Canada ($35,494) 19 Germany ($31,095) using its income to bring 10 Netherlands ($35,078) 20 Italy ($30,732) human development? about14 Wali Memon 2006
  15. 15. The UNDP’s HDI Rankings (2005) 1 Iceland (.968) 11 Finland (.951) 2 Norway (.968) 12 United States (.951) 3 Australia (961) 13 Spain (.949) 4 Canada (.960) 14 Denmark (.949) 5 Ireland (.959) 15 Austria (.948) 6 Sweden (.956) 16 United Kingdom (.946) 7 Switzerland (.955) 17 Belgium (.946) 8 Japan (.953) 18 Luxembourg (.944) 9 Netherlands (.953) 19 New Zealand (.943)10 France (.952) 20 Italy (.941) 2006 Wali Memon 15
  16. 16. Is the HDI Enough to Measure a Country’s Level of Development? According to the UNDP, the answer is: “Not at all.” “The concept of human development is much broader than what can be captured in the HDI, or any other composite indices…” “The HDI and the other composite indices can only offer a broad proxy on some of the key the issues of human development…” “A fuller picture of a countrys level of human development requires analysis of other human development indicators and information.” 16 Wali Memon 2006
  17. 17. A Sampling of Other Development Indexes • The Economist’s “Quality of Life” Index • UNICEF’s “Child-Welfare” Index • The “Happy Planet” Index • The UNDP’s “Human Poverty Index” • The UNDP’s “Gender Empowerment Measure” • International Living’s “Quality of Life” Index • The “Global Peace Index” • Freedom House’s “Freedom Rankings”17 Wali Memon 2006
  18. 18. Three Issues to Consider When Evaluating Indexes Like the HDI1) Validity2) Reliability3) Wali Memon18 Parsimony 2006
  19. 19. Validity • What is the index supposed to measure? • What indicators make up the index? • Are these the best indicators for this index? • How are the indicators calculated? • Are there better ways to calculate these indicators? • In short, how well does the index actually measure what it is supposed to be measuring?19 Wali Memon 2006
  20. 20. Reliability Who or what organization collected the data? How were the data collected? In short, if you or someone else were to try to replicate the index would you end up with more or less the same results?20 Wali Memon 2006
  21. 21. Parsimony The whole point of an index is to simplify the measurement of a particular phenomenon. In short, does the index rely upon as few indicators as reasonably possible without undermining its validity?21 Wali Memon 2006