This document compares the Gross Domestic Product (GDP) per capita and the Human Development Index (HDI) of four countries - Sweden, Czech Republic, Turkey, and Cuba - over several decades. It finds that GDP per capita and HDI generally increased together for all four countries, indicating a positive relationship between economic growth and human development progress. However, Cuba had a higher HDI relative to its GDP per capita, suggesting economic indicators alone do not fully capture a country's development. The document uses data from sources like the World Bank to analyze trends in life expectancy, education, income, and more for each country.

1. 1
MACRO THEORY 2015
ASSIGNMENT
RELATIONSHIP BETWEEN GDP & HDI
IN SWEDEN, CZECH REPUBLIC, TURKEY AND CUBA
HARUN DEMIRCI 940517P118
TOMAS SECKAR 911225P377
In Trollhättan 24.04.2015

2. 2
SUMMARY
The most used indicator of countries development is unarguably GDP (Gross Domestic
Product). However, sincethe GDP does not include allthe factors, which show how strong and
developed the country is, we have decided to compare it with other indexes to get more
complex view on this topic. As we have found the HDI (Human Development Index) is another
much used indicator of country development, so our main goal of this work will be to
determine the positive, negative or neutral relationship between the Gross Domestic Product
(GDP) and the Human Development Index (HDI) in some countries and to find the difference
between these two indicators within the countries. This gives us more complex view on how
countries actuallystand againsteach other, becausepeople in countries with ahigh GDP don’t
have to be necessarily happier than in countries with a lower GDP. So here comes the
question, is GDP the right indicator of country development? To answer this question we
compare Sweden, Czech Republic, Turkey and Cuba.
INTRODUCTION
Inordertoworkwith GDP,respectively GDP per capita,and HDI, we have to define
these indicators.
GDP (Gross Domestic Product) per capita PPP
GDP of the country is not reliable indicator of country development when
speaking about comparison within countries, because the GDP depends on the size of the
country, respectively on its population. So we will focus on GDP per capita adjusted by
Purchasing Power Parity (PPP) in this work, which will contribute to the comparison much
more. First of all, let’s define what does the GDP actually mean.
“GDP is a value of all final goods and services produced within a country in a
given period of time.” There are two ways of measurement of GDP, expenditure method and
income method.
To calculate GDP according to the expenditure method we use this equation:
GDP = C + G + I + NX
where: C stands for all private consumption in a given economy. G is value of
government spending, I stands for business spending on capital (or investments) and
NX is net exports, which equals to X-IM (Exports – Imports). (2-a)

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Income method of calculation of GDP is also called as “value-added” = value of the output
produced by a firm – value of the intermediate goods used to produce it. We use also this
equation: (3-a)
∑ value added by all firms = wages + rents + interests + profits
In order to gain GDP per capita we divide the GDP by the value of population. In
order to compare the GDP per capita within the countries, it is important to adjust this value
to the Purchasing Power Parity.
HDI (Human Development Index)
Some scientists agree that GPD should not be the only indicator of country
development. Alsopeople and their capabilities should be included in this indicator. Therefore
the HDI was created.
The HDI measures the average performance in three key dimensions of human
development: 1) long and healthy life, 2) Knowledge and 3) standard of living. The final value
of HDI is the geometric mean of normalized values of each dimension. Let’s look on these
dimensions more in detail.
1) Long and healthy life is calculated based on life expectancy at birth, using minimum value
of 20 years and maximum value of 85 years.
2) Knowledge or education dimension is based on the number of years of schooling. To
normalize the value we use the minimum value of 0 years and maximum value of 18 years.
3) Standard of living dimension is calculatedby GNI/capita (Gross National Income per capita).
The interval for normal distribution is from $100 (PPP)1 to $75,000 (PPP).
The important thing to sayis that HDI does not describe inequalities, poverty, human security,
empowerment, etc. (3-b) As a data source for stating HDI is used United Nations Population
Division, the United Nations Educational, Scientific and Cultural Organization (UNESCO),
Institute for Statistics (UIS) and the World Bank.
1 adjusted to PurchasingPower Parity

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METHOD
In order to compare GDP per capita PPP and HDI we have to find the relevant
data for long period development of different countries, as a source we will use World Bank.
Then analyze these data and find either positive or negative relationship between GDP per
capita PPP and HDI. After this, it will be valuable to compare these data within the countries
in order to see if higher GDP per capita PPP means higher HDI in comparison with another
country. After this, we will be able to see, which of these indicators is more valuable.
SURVEY
SWEDEN
Sweden’s last(According to this data) Human Development Index value is
0.898,which is very high compare to other countries, the ranking position of the country is 12
among the whole countries in the world. The value of HDI increased by 15.7 percent between
1980 and 2013. This table shows us the numbers of life expectancy, mean years of schooling,
expected years of schooling and Gross Domestic Product per capita. This data also helps us to
understand the progress of Sweden between 1980 and 2013.
Table1: Sweden’s trends based on consistent time series data
Life
expectancy
at birth
Expected
years of
schooling
Mean
years of
schooling
GNI per
capita
HDI value GDP per
capita
(PPP$)
1980 75.8 12.8 9.1 23,832 0,776 10,288
1985 76.7 12.5 9.5 25,671 0,786 14,496
1990 77.5 12.9 10.0 28,960 0,807 18,624
1995 78.7 15.9 10.5 28,794 0,849 21,495
2000 79.7 18.9 11.0 34,614 0,889 27,641
2005 80.6 15.9 11.6 39,460 0,887 34,812
2010 81.4 15.9 11.7 41,803 0,895 39,894
2011 81.6 15.8 11.7 42,701 0.896 41,614
2012 81.7 15.8 11.7 42,902 0.897 42,428
2013 81.8 15.8 11.7 43,201 0.898 43,407
(4-a)
As we define before HDI measures the basic human development in a country
and masks us the inequality in the distribution of human development among the
population. To increase simultaneously economic growth helps the country to have a better
education and health services but HDI is a good measure of progress of nations too. In this
case Sweden has a high GDP per capita and also have a high value of HDI which means they

5. 5
have a high standard of living, well-structured education system, developed health care
system and larger amount of money at the same time.
According to current research the problem for most of the countries is that
they can’t provide a sustainable growth due to the lower value HDI then they only care
about GDP or another aspects which make the states richer but the quality of education or
the basic requirements of the society doesn’t increase at the same time or at the same level.
Sweden has succeeded all these things at the same time as we can see on the list of Sweden
HDI trends. In this case Sweden has the higher level of GDP per capita but it does not lead
HDI level to be higher as well.
CZECH REPUBLIC
Czech Republic’s last HDI value for year 2012 is 0.873 according to this research
which means Czech Republic is in the list of very high human development category HDI
value for 2012 is 0.873 -positioning the country at 28 among more than 187 countries in the
world. Between 1995 and 2012, Czech Republic’s HDI value increased from 0.795 to 0.873
which means an increase of 10 percent or average annual increase of about 0.6 percent.
According to this data GDP per capita was also increased year by year as HDI
increased at the same time. This data reviews Czech Republic’s progress in each of the
indicators Czech Republic’s life expectancy at birth increased by 7.1 years, mean years of
schooling increased by 2.0 years and expected years of schooling increased by 2.0 years.
Czech Republic’s GDP per capita increased by about 40 percent since 1995 as we can see in
the list of data of Czech Republic.
Table 2: Czech Republic’s trends based on consistent time series data
Life
expectancy
at birth
Expected
years of
schooling
Mean
years of
schooling
GNI per
capita
HDI value GDP per
capita
(PPP$)
1980 70.7 13.3 10.3 - - -
1985 71.1 12.4 10.5 - - -
1990 71.9 11.9 10.9 - - -
1995 73.3 12.6 11.4 15,750 0,795 13,841
2000 74.9 13.8 11.9 17,041 0,824 16,524
2005 76.3 14.6 13.1 20,370 0,862 22,677
2010 77.5 15.3 12.3 22,042 0,871 27,431
2011 77.7 15.3 12.3 22,341 0,872 28,480
2012 77.8 15.3 12.3 22,067 0,873 28,706
(5-a)

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According to Akbar Khodabakhshi a process of enlarging people’s freedoms and
opportunities and improving their well-being, enabling them to lead long, healthy lives; to
have access to knowledge; to enjoy a decent standard of living; and to participate in the
decisions that affect them (6-a). In this case Czech Republic has the ability to provide their
own people to access all the possibilities such as education and etc. and GDP has also some
effect on society’s welfare which leads to improve the country’s development level.
According to this data GDP and HDI has a higher level of value at the same time.
TURKEY
Turkey’s last HDI value for 2013 is 0.759 which means turkey is in the list of
high value HDI category and the positioning of the country at 69 out of among 187 countries
and territories. Turkey’s HDI value increased from 0.496 to 0.759, an increase of 53.0
percent or an average annual increase of about 1.30 percent sine year 1980 till 2013
according to this data.
This data reviews Turkey’s progress in each of the indicators. Turkey’s life
expectancy at birth increased by 16.6 years, mean years of schooling increased by 4.7 years
and expected years of schooling increased by 6.9 years since 1980 . Turkey’s GDP per capita
increased by about 112.5 percent since 1980.
Table 3: Turkey’s trends based on consistent time series data
Life
expectancy
at birth
Expected
years of
schooling
Mean
years of
schooling
GNI per
capita
HDI value GDP per
capita
(PPP$)
1980 58.7 7.5 2.9 8,656 0.496 3.545
1985 61.7 8.3 4.0 9,266 0.542 4.939
1990 64.3 8.9 4.5 10,546 0.576 7.111
1995 67.0 9.6 4.8 11,372 0.604 8.575
2000 70.0 11.1 5.5 12,890 0.653 10.199
2005 72.5 11.9 6.0 15,060 0.687 13.443
2010 74.3 13.9 7.2 16,587 0.738 16,193
2011 74.6 14.4 7.4 17,814 0.752 17,715
2012 74.9 14.4 7.6 18,011 0.756 18,184
2013 75.3 14.4 7.6 18,391 0.759 18,994
(6-b)
Turkey has also a higher HDI value compare to other countries and some
factors provides HDI value to be high such as economic growth in the country’s economy
especially in the last 10 years and the raising life expectancy. But is there enough
information about Turkey to say that Turkey has the ability to provide their people a high

7. 7
standard of living or basic requirements such as education or health care by the means of
higher GDP or higher economic growth rate. If we examine the chances in HDI, it help us to
understand or find out what the society or country have and that gives as a better view.
CUBA
Cuba’s last HDI value for 2013 is 0.81 which means Cuba is one of the country
which is in the very high human development country and positioning the country at 44
among more than 1987 countries and territories. Cuba’s HDI value increased from 0.681 to
0.815, an increase of 19.7 percent or an average annual increase of about 0.55 percent since
1980. The rank of Cuba is shared with Bahrain.
This data reviews Cuba’s progress in each of the indicators. According to this
data Cuba’s life expectancy at birth increased by 5.5 years, mean years of schooling
increased by 3.7 years and expected years of schooling increased by 2.4 years since 1980 and
also Cuba’s GDP per capita increased by about 104.9 percent since 1980.
Table 4: Cuba’s trends based on consistent time series data
Life
expectancy
at birth
Expected
years of
schooling
Mean
years of
schooling
GNI per
capita
HDI value GDP per
capita
(PPP$)
1980 73.8 12.1 6.5 9,683 0.681 2.024
1985 74.5 11.9 7.7 13,329 0.714 2.270
1990 74.6 12.3 8.5 13,225 0.729 2.702
1995 75.4 11.3 9.2 8,891 0.710 2.783
2000 76.7 12.2 9.6 10,926 0.742 2.744
2005 77.7 14.6 9.9 13,841 0.786 3.776
2010 78.7 16.2 10.2 18,011 0.824 5.701
2011 78.9 15.4 10.2 18,523 0.819 6.051
2012 79.1 14.5 10.2 19,266 0.813 -
2013 79.3 14.5 10.2 19,844 0.815 -
(7-a)
Cuba is an exception for most of the cases. The difference between these
countries and Cuba is that Cuba has lower GDP per capita but they have also a high level of
HDI. USA and Cuba have been economically isolated from each other but, despite the
strenuous efforts of the U.S. government, Cuba has not been isolated from most of the
countries and they can easily trade with each other. The main reason of Cuba’s poverty is
because of domestic issues. In this case we can say that the GDP per capita is not a very
perfect measure for human development because they are combines with real income and

8. 8
Human Development Index. Actually the fact that we have to know is Cuba has performed
better than other countries.
CONCLUSION
We have found out the positive relationship between GDP per capita adjusted
to Purchasing Power Parity and Human Development Index in all four countries (Sweden,
Czech Republic, Turkey and Cuba). You can see that in tables and on graphs if you compare
long run development of GDP per capita PPP and HDI, when grows one of them the other
one grows too. There were some exceptions, for example between years 2000 and 2005 in
Sweden, the GDP per capita PPP grew up from 27641 $ to 34812 $ but HDI fell down from
the value of 0,889 to the value of 0,887. However, this can be caused by some unusual
factors, which are not common. As we can see, it is not trend, so statistically it is possible
when normal distribution is taken into account. Therefore we should not make any
statement based on that information.
We already know that there is positive correlation between these two indicators, but
that was predictable. Here comes more important question: does it necessarily mean that if
one country has higher GDP per capita PPP then it also has to have higher value of HDI? As
we have found out, it is not true. In most cases we can say so, the higher GDP per capita PPP
means higher HDI in comparison with another country, for example this is true when
speaking about Sweden, Czech Republic and Turkey. However, when we take a look on
values of Cuba´s indicators and values of Turkey´s indicators, we can see the real difference.
Cuba has lower GDP per capita PPP then Turkey in all years, but higher HDI.
From all the stated above, it is possible to use GDP per capita PPP to see the level of
development of country. In most cases it is really valuable indicator. But that does not work
every time. To see the more complex view (human development, technology, etc.) it is
necessary to use other indicators as well. Therefore both GDP per capita PPP and HDI (and
many others) should be considered when the development of countries is focused to
examine.

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REFERENCES
(2-a) - http://www.investopedia.com/terms/g/gdp.asp
(3-a) - http://www.scribd.com/doc/23029328/Chap-10-Mankiw-Measurement-of-National-
Income#scribd
(3-b) - http://hdr.undp.org/en/content/human-development-index-hdi
(4-a) - http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/SWE.pdf
(5-a) - http://hdr.undp.org/sites/default/files/Country-Profiles/CZE.pdf
(6-a) - http://www.ijtef.org/papers/111-F522.pdf
(6-b) - http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/TUR.pdf
(7-a) - http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/CUB.pdf