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Efficiency of Pena’s P2 Distance in Construction of Human Development Indices

Author

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  • Nayak, Purusottam
  • Mishra, SK
Abstract
The paper is an attempt to evaluate the efficiency of Pena’s DP-2 method over a host of methods used to make composite indices. To undertake this exercise, variables and data used and methodology adopted in Human Development Report 2011 are employed along with nine other methodologies employed by other scholars. Although there is no agreed principle of judging an index to be best among alternative indices, it may be suggested that the composite index which is most informative among all other indices may be considered as the most acceptable one. The present study reveals that Pena-DP2 index and Penmax index have close similarity. Computationally, Pena’s method of construction of index is much simpler, but the interpretation of Penmax index is more straightforward. On the other hand, Maxmin index is norm-based and has a justification on Wald’s principle of decision-making. The Maxmin index also is the most egalitarian index against the Principal Component based index, which is known to be most elitist. On ‘sum of absolute correlation’ and ‘sum of squared correlation’, too, the Maxmin index is superior to other indices. It appears, therefore, that the Maxmin composite index which is obtained by maximization of minimum of correlation between the composite index and the constituent variables is a better than others. Further, if we go by the argument of Neumann and Morgenstern none of the composite indices is a cardinal measure in the strict sense of measurement.

Suggested Citation

  • Nayak, Purusottam & Mishra, SK, 2012. "Efficiency of Pena’s P2 Distance in Construction of Human Development Indices," MPRA Paper 39022, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:39022
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    References listed on IDEAS

    as
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    17. Alexander Cotte Poveda, 2012. "Estimating Effectiveness of the Control of Violence and Socioeconomic Development in Colombia: An Application of Dynamic Data Envelopment Analysis and Data Panel Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 105(3), pages 343-366, February.
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    2. Carolina Bruzzi & Enrico Ivaldi & Stefano Landi, 2020. "Non-compensatory aggregation method to measure social and material deprivation in an urban area: relationship with premature mortality," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(3), pages 381-396, April.
    3. Mishra, SK, 2012. "Construction of Pena’s DP2-based ordinal synthetic indicator when partial indicators are rank scores," MPRA Paper 39088, University Library of Munich, Germany.
    4. Prada, Albino & Sanchez-Fernandez, Patricio, 2014. "Del concepto de crecimiento económico al de desarrollo y bienestar de las naciones: Una aplicación a la Unión Europea [From economic growth to development and welfare of nations: An application to ," MPRA Paper 54764, University Library of Munich, Germany.
    5. Diego Roldán M & Patricio Cárdenas & Francisco Roldán A. & Pablo Beltrán & Doménica Ávila, 2017. "Comparing Functional Forms Of Aggregation For Synthetic Indicators Of Well-Being: The Ecuadorian Case," Journal of Smart Economic Growth, , vol. 2(3), pages 107-122, December.
    6. Enrico Ivaldi & Guido Bonatti & Riccardo Soliani, 2017. "An Indicator for the Measurement of Political Participation: The Case of Italy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 132(2), pages 605-620, June.
    7. Nayak, Purusottam & Mishra, Sudhanshu K, 2014. "A State Level Analysis of the Status of Social Sector in India," MPRA Paper 58136, University Library of Munich, Germany.
    8. Enrico Ivaldi & Lara Penco & Gabriele Isola & Enrico Musso, 2020. "Smart Sustainable Cities and the Urban Knowledge-Based Economy: A NUTS3 Level Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 150(1), pages 45-72, July.
    9. Guido Bonatti & Andrea Ciacci & Enrico Ivaldi, 2021. "Different Measures of Country Risk: An Application to European Countries," JRFM, MDPI, vol. 14(1), pages 1-16, January.
    10. Stefano Landi & Enrico Ivaldi & Angela Testi, 2018. "Measuring Change Over Time in Socio-economic Deprivation and Health in an Urban Context: The Case Study of Genoa," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(2), pages 745-785, September.
    11. Enrico Ivaldi & Guido Bonatti & Riccardo Soliani, 2018. "Objective and Subjective Health: An Analysis of Inequality for the European Union," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 138(3), pages 1279-1295, August.

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    More about this item

    Keywords

    Human development index; Pena DP2 method; efficiency of composite index;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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