Measuring HDI – the old, the new and the elegant

This is a cross-post of a piece written by Srijit Mishra (Indian Gandhi Institute of Development Research – IGIDR), one of the winners of the GDN Outstanding Research in Development Award in 2013, based on the working paper “Measuring Human Development Index: The old, the new and the elegant” co-authored with Hippu Salk Kristle Nathan

The Human Development Index (HDI), since its inception in 1990, has come up with an indicator for each country that aggregates the three dimensions of health (representing how long and fulfilled a life one lives), literacy (representing knowledge) and income (as a proxy for standard of living) into a single dimension. This was an important departure from income-based measures that focused on a single dimension. Before aggregating across dimensions, each indicator was normalized and took values between zero and unity.[1]

Prior to 2010, the approach followed to aggregate was a simple averaging across dimensions. A problem with this method was that a deficit in one dimension will perfectly substitute an equal attainment in another dimension. Income remaining same, this means that a country where both health and education attainments have the same value (say, 0.4 each) will have the same HDI as another country where health is 0.2 and education is 0.6 (a situation not quite uncommon in some of the Sub-Saharan countries reeling under a HIV/AIDS epidemic a few years ago).[2]

In 2010, to address perfect substitutability across dimensions, the calculation of HDI was aggregated by the geometric mean. Usage of the geometric mean also meant that the ordinal ranking across countries would not change if the maximum used for normalizing changed therefore the pegging of a maximum to a goalpost was done away with. Note that this was an advantage of the method, but not a requirement to begin with, definitely not when millennium development goals that can influence the various outcomes that are of relevance in the measure of HDI are themselves pegged to a goalpost.

We propose another alternative method of aggregation by taking the additive inverse of the distance from the ideal. This method also addresses the perfect substitutability across dimensions. In addition, this proposed method satisfies two other conditions. One is that the emphasis across dimensions should be based on their proportionate shortfall from the ideal (note that this ideal is a goalpost and not be understood as a transcendental ideal) or is shortfall sensitive. The other is that the same gap should be considered worse-off at higher levels of attainment. Or, simply put the gaps should decrease as attainment increases.

Read more of this post

Read “Inclusiveness and human development: The hidden linkage?” on Mishra and Nathan’s research proposal presented at the GDN 14th Annual Conference

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