Human Development Index

Human Development Index (HDI)
What is the Human Development Index (HDI)?

The Human Development Index (HDI) is a tool developed by the United Nations
to measure and rank countries' levels of social and economic development. Four
principal areas of interest are used to rank countries: mean years of schooling,
expected years of schooling, life expectancy at birth, and gross national income per
capita. This index makes it possible to follow changes in development levels over
time and to compare the development levels of different countries.
KEY TAKEAWAYS
The HDI is a measurement system used by the UN to evaluate the amount of
individual human development a country has.
The HDI uses components such as average annual income and educational
expectations to rank and compare countries.
The HDI has been criticized by social advocates for not representing a broad
enough measure of quality of life and by economists for providing little additional
useful information beyond simpler measures of the economic standard of living.
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Human Development Index (HDI)
Understanding Human Development Index (HDI)

The Human Development Index (HDI) was established to place emphasis on
individuals, more precisely on their opportunities to realize satisfying work and
lives. Evaluating a country's potential for individual human development provides
a supplementary metric for evaluating a country's level of development besides
considering standard economic growth statistics, such as gross domestic product
(GDP).
This index can also be used to examine the various policy choices of nations; if, for
example, two countries have approximately the same gross national income (GNI)
per capita, then it can help to evaluate why they produce widely disparate human
development outcomes. One goal of the proponents of the HDI is to stimulate such
public policy debate.
How Is the HDI Measured?
The HDI is a summary measurement of basic achievement levels in human
development. The computed HDI of a country is an average of indexes of each of
the life aspects that are examined: knowledge and understanding, a long and
healthy life, and an acceptable standard of living. Each of the four components is
normalized to scale between 0 and 1, and then the geometric mean of the three
components is calculated.
The health aspect of the HDI is measured by the life expectancy, as calculated at
the time of birth, in each country, normalized so that this component is equal to 0
when life expectancy is 20 and equal to 1 when life expectancy is 85.
Education is measured on two levels: the mean years of schooling for residents of a
country and the expected years of schooling that a child has at the average age for
starting school. These are each separately normalized so that 15 mean years of
schooling equals one, and 18 years of expected schooling equals one, and a simple
mean of the two is calculated.
The metric chosen to represent the standard of living is GNI per capita based on
purchasing power parity (PPP), a common metric used to reflect average income.
The standard of living is normalized so that it is equal to 1 when GNI per capita is
$75,000 and equal to 0 when GNI per capita is $100. The final Human
Development Index score for each country is calculated as a geometric mean of the
three components by taking the cube root of the product of the normalized
component scores.
Advantages of the Human Development Index
-It provides us with a much fuller picture of how well developed a country is,
allowing for fuller comparisons to be made.
-It shows us that while there is a general correlation between economic and social
development, two countries with the same level of economic development may
have different levels of social development.
-Some argue that this is a more human centered approach, concerned more with
actual human welfare than just mere economics. It gets more to ‘the point’ of
economic development.
-The Human Development Index (HDI) is a measure of economic development

and economic welfare.
-The Human Development Index examines three important criteria of economic

development (life expectancy, education and income levels) and uses this to create
an overall score between 0 and 1.
-1 indicates a high level of economic development,
-0 a very low level.

Limitations of Human Development Index
-Wide divergence within countries. For example, countries like China and Kenya
have widely different HDI scores depending on the region in question. (e.g. north
China poorer than south-east)
-HDI reflect long-term changes (e.g. life expectancy) and may not respond to
recent short-term changes.
-Higher national wealth does not indicate welfare. GNI may not necessarily
increase economic welfare; it depends on how it is spent. For example, if a country
spends more on military spending – this is reflected in higher GNI, but welfare
could actually be lower.
-Also, higher GNI per capita may hide widespread inequality within a country.
Some countries with higher real GNI per capita have high levels of inequality (e.g.
Russia, Saudi Arabia)
-However, HDI can highlight countries with similar GNI per capita but different
levels of economic development.
-Economic welfare depends on several other factors, such as – threat of war, levels
of pollution, access to clean drinking water etc.
-Relying on the HDI score alone may disguise a lack of social development in a
country – for example a very high GNI can compensate for poor life-expectancy,
as is the case in the United States.
-It is still only providing a fairly limited indication of social development – only
health and education are covered – there are many other ways of measuring health
and education.
-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-centered 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.
-There are likely to be significant variations in human development outcomes

within as well as between countries.
-PPP values change very quickly and are likely to be inaccurate or misleading.

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Human Development Index (HDI)

What is the Human Development Index (HDI)?

Understanding Human Development Index (HDI)

-The Human Development Index (HDI) is a measure of economic development

-The Human Development Index examines three important criteria of economic

-1 indicates a high level of economic development,

-0 a very low level.

-There are likely to be significant variations in human development outcomes

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