Human Development Index: Introduction. Sabina Alkire (OPHI), 29 Feb 2011

Transcription

1 Human Development Index: Introduction Sabina Alkire (OPHI), 29 Feb 2011

2 Sen: Decade of Human Development Public acclaim is not always a sound way of judging the success of an intellectual enterprise.

3 Sen: Decade of Human Development John Stuart Mill s book Subjection of Women: his only book on which his publisher lost money; Bertrand Russell s book on mathematical logic initially had very few readers; Wittgenstein s Philosophical Investigations achieved its prominence only very slowly; Mozart s appreciation in the world of music came... more hesitantly than he had hoped.

4 Sen: Decade of Human Development why has the Human Development Report received so much reflective attention with such speed in a world where new ideas often take decades, sometimes centuries, to receive the recognition they deserve?

5 Sen: Decade of Human Development This is, at one level, an easy question to answer. Rather than concentrating only on some solitary and traditional measure of economic progress (such as the gross national product per head), human development accounting involves a systematic examination of a wealth of information about how human beings in each society live. It brings an inescapably pluralist conception of progress..

6 Basic Human Development Measures Well-Being measures summarize the data of all people. Average --- HDI, GII Inequality measures summarize the range of the *entire* distribution ratio of two standards. Spread --- IHDI Poverty measures are based on the population who fall short of some minimum standard. Base --- MPI

7 What kind are these? Gini Coefficient Happy Planet index $1.25/day index GDP/capita Ratio of 90% to 10% Percentage of malnourished children Note: many people may not be clear on these distinctions

8 Sen: Decade of Human Development John Stuart Mill s book Subjection of Women: his only book on which his publisher lost money; Bertrand Russell s book on mathematical logic initially had very few readers; Wittgenstein s Philosophical Investigations achieved its prominence only very slowly; Mozart s appreciation in the world of music came... more hesitantly than he had hoped.

9 History of HDI: 1990

10 History of HDI: 1990 Data Indicators Treatment of Income Weights Bounds/Normalisation Functional form

11 History of HDI: 1990 Data International Indicators Life Expectancy at birth, GDP/capita Literacy Treatment of Income Weights Log Equal

12 History of HDI: 1990 Bounds/Normalisation 1987 values for minimum 1987 values for longevity as max 100% literacy as maximum Income maximum $4861 PPP = poverty line! Functional form Simple average

13 History of HDI: 1991 Key Document: Technical Notes in HDI 1991 addresses many concerns from 1990 Indicators Adult Literacy + Mean Years of Schooling Weight: 2/3 Weight: 1/3 Income: the poverty max was too sharp Especially for rich countries Replaced log with a by hand version:

14 History of HDI: 1991 The new approach to income?

15 History of HDI: 1991 The new approach to income. Actually lasted quite awhile!

16 History of HDI: 1994 Income Threshold changed to current average global value of GDP per capita in PPP. ($5120) Minimum income now $200; Max $40,000 (LE: 25, 85) (Literacy: 0, 100) (Schooling: 0, 15)

17 History of HDI: 2000? Income Threshold was dropped Minimum income lowered to $100; Maximum maintained at $40,000 Income treated with simple log (log y) log (100)/ (log 40K)-log 100

18 Old Human Development Index Dimension Indicator Health Life expectancy at birth (I 1 ) Education Standard of living (I 2 ): Weighted average of: Adult literacy rate (w=2/3) Combined primary, secondary and tertiary gross enrolment ratio (w=1/3) Log of GDP per capita (PPP US$) - log to incorporate the diminishing returns. (I 3 )

19 Old Human Development Index For each dimension, maximum and minimum values are determined and a dimension index is calculated as: I=[Actual Value-Min]/[Max-Min] HDI=(1/3)[I 1 +I 2 +I 3 ]

20 Dimensions Criticisms of HDI Why not political freedom? Indicators Why only these? Why not nutrition? HH income? Correlation between indicators => redundancy? Data (doesn t change every year) Weights Aggregation How treat income? Censored? Log? Limitations Inequality, Gender, Macro, Welfare

21 Some Criticisms of HDI Weak Indicators Missing Dimensions Normalization introduces artifacts Equal Weights are not equal, nor justified Functional Form Comparisons across Time Problematic Ignores Inequality Redundancy

22 Weak Indicators For all countries, one indicator is highly correlated (>.9) with other two (McGillivray & White 93) not for subsets of countries by low/med/high HD. Issues of comparability; extrapolation for missing values. Stock and flow indicators are combined Some Indicators (LE) are not highly policy responsive LE at birth problematic better age-specific LE (Anand) PPP imperfect Log of income arbitrary Use of US Dollar currency PPPs affects rankings (e.g. vs gold)

23 Missing Dimensions Too restricted. One of the most common criticisms leveled at the HDI is that it excludes other social achievements crucial to the quality of life most notably political freedom and human rights. Booyesen 2002 See Lind, 1992, Srinivasen 1994, Hopkins 1991, ), Chakravarty. Also excludes environment, work, personal security Streeten 1994 argues against adding political freedom to the HDI because: 1) political freedom can t be traded off against the other dimensions; 2) PF has more volatility so affect intertemporal stability of index; 3) new dimensions compromise objectivity; 4) relation between political freedom and HD not that clear cut.

24 Ranis Samman & Stewart 06: 31 indicators have low corrs and reflect 12 dimensions

25 Normalization Weight of indicator is sensitive to the choice of endpoint HDI rankings sensitive to the upper bound (Noorbakhsh, 1996) Income upper bound too low for developed countries? (Trabold-Nubler, 1991) No principle of diminishing returns (Kelly 1991, Noorbaksh 1996, Lüchter & Menkhoff 1996)

26 Normalization Education Index (%) Life Expectancy (Years) GDP (PPP USD) HDI Rank 2004 USA 97.0% , Finland 99.0% , USA 97.1% , Finland 99.3% , Difference in performance in two years USA 0.1% Finland 0.3% HDI of USA in 2005, had the GDP been not restricted to 40,000 PPP USD

27 Equal Weights Weights are not effectively equal but are affected by the lower and upper bounds. Still, Chowdhury and Squire, 2006 found that expertderived weights did not significantly differ from equal weights When robustness tests are applied 2004 human development index ranking, 70% of all possible comparisons between countries would not change under any weights. If the weights vary only between 0.25 and 0.5 for each dimension, then 92% of comparisons are robust (Foster, McGillivray and Seth 2009 See also Cherchye, Ooghle and van Puyenbroecke 07).

28 Functional Form HDI components means have different variances Multiplicative more sensitive to improvements in underachieving domains

29 Comparison across time Low, Med, Hi and now VHigh HD category definitions vary over time. Direct intertemporal comparisons are not possible from HDRs. Reports provide up-to-date HDI trends based on consistent data time series & methodology. (e.g. Table G in HDR 2009)

30 Ignores inequality HDI is the same for any distributions having the same mean. This has generated a huge amount of criticism and many proposals for improvement e.g. Hicks 1997, Sagar and Najam 1998, Foster Lopez-Calva Szekely 2005, Grimm Harttgen Klasen and Misselhorn 2008, Seth 2009.

31 Redundant? Stewart 1985, McGillivray 1991 and McGillivray & White 1993, and Srinivasan 1994 among others draw attention to association between indicators [E.g. the Kendall tau20 coefficients (τ) for 2004 are 0.55 for health and education, 0.66 for health and income, and 0.58 for income and education]. However note that positive associations between indicators produce rankings that are more robust to small changes in weights (Foster McGillivray & Seth 2009).

32 Incomplete Bibliography on HDI Methodology Anand, S., Sen, A.: The income component of the human development index. J. Hum. Dev. 1, (2000) Booysen, F.: An overview and evaluation of composite indices of development. Soc. Indic. Res. 59, (2002) Cahill M. B. (2005), Is the human development index redundant? Eastern Economic Journal 31(1), 1-5 Chakravarty, S.R.: A generalized human development index. Rev. Dev. Econ. 7, (2003) Chatterjee, S.K.: Measurement of human development: an alternative approach. J. Hum. Dev. 6, (2005) Cherchye, L., E. Ooghe, and T. V. Puyenbroeck (2008). Robust human development rankings. Journal of Economic Inequality 6, Cherchye, L., Moesen W., Van Puyenbroeck T.: Legitimately diverse, yet comparable: on synthesizing social inclusion performance in the EU. J. Common Mark. Stud. 42, (2004) Dar,H.A.: On making human development more humane. Int. J. Soc. Econ. 31, (2004) Desai, M. (1991). Human development: concept and measurement, European Economic Review 35. Despotis, D.K.: A reassessment of the human development index via data envelopment analysis. Int. J. Soc. Econ. 56, (2005) Dowrick, S., Dunlop, Y., Quiggin, J.: Social indicators and comparisons of living standards. J. Dev. Econ. 70, (2003) Fleurbaey, M., Hagneré, C., Trannoy, A.: Welfare comparisons with bounded equivalence scales. J. Econ. Theory 110, (2003) Foster, J. E., L. F. Lopez-Calva, and M. Székely (2005). Measuring the distribution of human development: Methodology and an application to mexico. Journal of Human Development 6, Foster, J. E., M. McGillivray, and S. Seth (2009). Rank robustness of composite indices. Working Paper 26, Oxford Poverty and Human Development Initiative, University of Oxford. Fukada-Parr, S., Shiva Kumar, A.K.: Readings in Human Development. Oxford University Press, Oxford (2003) Fukada-Parr, S.: Indicators of human development and human rights overlaps, differences and what about the human development index? Stat. J. U.N. 18, (2001) Grimm M., K. Harttgen, S. Klasen and M. Misselhorn (2008). A Human Development Index by Income Groups. World Development 36 Hicks, D. A. (1997). The inequality adjusted human development index: A constructive proposal. World Development 25, Hopkins, M.: 1991, Human development revisited: A new UNDP report, World Development 19, pp Kelly, Allen C. (1991). The Human Development Index: "Handle with Care". Population and Development Review 17, pp Lind, N.: Values reflected in the human development index. Soc. Indic. Res. 66, (2004) Lind, N.C.: 1992, Some thoughts on the Human Development Index, Social Indicators Research 27, pp Lüchters, G., Menkhoff, L.: Chaotic signals from HDI measurement. Appl. Econ. Lett. 7, (2000) Mahlberg, B., Obersteiner, M.: Remeasuring the HDI by data envelopment analysis. International Institute for Applied Systems Analysis Interim Report (2001) Mazumdar, K.: A new approach to human development index. Rev. Soc. Econ. 61, (2003) McGillivray, M. (1991). The human development index: yet another redundant composite development indicator? World Development 19(10). McGillivray, M. and White, H. (1993). Measuring development? The UNDP's human development index, Journal of International Development 5(2), 183±192. Nardo M., Saisana M., Saltelli A., Tarantola S., Hoffman A., Giovannini E.: Handbook on Constructing Composite Indicators: Methodology and User s Guide. OECD Statistics Working Paper (JT ) (2005) Noorbakhsh, F.: A modified human development index. World Dev. 26, (1998) Ogwang, T.: 1994, The choice of principal variables for computing the Human Development Index,World Development 22, pp Ogwang, T.: 1994, The choice of principal variables for computing the Human Development Index, World Development 22, pp Panigrahi R., Sivramkrishna, S.: An adjusted human development index: robust country rankings with respect to the choice of fixed maximum and minimum indicator values. J. Hum. Dev. 3(2), (2002) Sagar, A., Najam, A.: The human development index: a critical review. Ecol. Econ. 25, (1998) Saisana, M., Saltelli, A., Tarantola, S.: Uncertainty and sensitivity analysis as tools for the quality assessment of composite indicators. J. R. Stat. Soc., Ser. A 168, 1 17 (2005) Seth, S. (2009). Inequality, interactions, and human development. Journal of Human Development and Capabilities 10, Srinivasan, T.N.: 1994b, Human development: A new paradigm or reinvention of the wheel?, American Economic Review (Papers and Proceedings) 84, pp Stewart, F.: 1985, Planning to Meet Basic Needs (Macmillan, London, pp. 1 66). Streeten, P.: 1994, Human development: Means and ends, American Economic Review (Papers and Proceedings) 84, pp Streeten, P.: 1995, Human development: The debate about the index, International Social Science Journal 143, pp Trabold-Nubler, H. (1991). The human development index - a new development indicator? Intereconomics, September/October.