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.

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

Volatility and growth: How can fiscal policy boost equitable growth in Argentina?

Volatility hurts growth, especially in low-income and emerging countries that are even more vulnerable to external shocks, which implies more risk and lower stability. The role of fiscal policies thus is not only to boost growth, but to cater for sustainable and equitable growth; especially for the poor who are the most vulnerable to market volatility.

“What can fiscal policy do to boost equitable growth in Argentina?”

Jimena Zúñiga, Marcelo Capello, Inés Butler and Néstor Grión from the IERAL of the Mediterranean Foundation attempt to provide an answer to this question in their research “A cycle-adjusted fiscal rule for sustainable and more equitable growth in Argentina”, which Jimena presented at the GDN 14th Annual Conference. In order to do this, they first define the main binding constraints to growth in Argentina, then they investigate which fiscal reform strategy is the most suitable to specifically tackle these constraints. They argue that for a reform strategy to be effective in Argentina, it must be inclusive; involving all levels of governmental sectors, and designed to stabilize key macroeconomic variables.

The proposed model is a cycle-adjusted fiscal rule, which is found to be effective in reducing Argentina’s macroeconomic volatility. In turn, this will result in long-term growth and an increase in welfare of the poor families. In the video below, Jimena Zúñiga explains the main pillars of this research and also briefly highlights the main findings and their potential impact on promoting sustainable and equitable growth in Argentina.

Jimena Zúñiga, IERAL of the Mediterranean Foundation

Read this Paper: A cycle-adjusted fiscal rule for sustainable and more equitable growth in Argentina

Understanding inclusive growth: Effective policies for more inclusive societies

By definition, inclusive growth entails the equitable allocation of resources in order to generate benefits that can be incurred by all sectors of the society, thus alleviating poverty and inequality. However, is inclusive growth necessarily pro-poor? And does it ensure reducing the troubles of the most disadvantaged while benefiting everyone? There is yet no clear coherent measure to combine all the dimensions of inclusive growth that involves how the elements of inclusiveness relate to each other and ultimately how they can collectively induce growth.

Rafael Ranieri from the Ministry of Planning, Budget and Management, Brazil presented a paper titled “Inclusive growth: Building up a concept” at the GDN 14th Annual Conference. He tackled the state of the debate on the concepts of inclusive growth and pro-poor growth; highlighting distinctive features of the concept of inclusive growth and contributing to the design of more effective policies through addressing the main issues that can take it further. He argues that, unlike pro-poor growth concepts, inclusive growth is not limited to income outcomes but is rather concerned with the process of growth. In other words, people must actively participate in the growth process for it to be inclusive.

Greater clarity about the meaning of inclusive growth is important to determining clearer policy objectives and thus to designing more effective policies to create more inclusive societies. In their paper, Ranieri and Raquel A. Ramos from the Centre d’Economie de Paris Nord, France emphasize that actual manifestation of inclusion in public policy make a country more resilient to change in the long term, taking into consideration the distinct nature of national concerns and social forces in each country.

                Rafael Ranieri, Ministry of Planning, Budget and Management, Brazil

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InfoLady: Empowering rural women at their door steps

Lack of access to information and government transparency are major blocks in the road of development and poverty alleviation in almost all emerging economies of the world. Women, especially in rural areas where accessibility to information is more acute, are impeded with poverty, illiteracy and disempowerment, which binds their ability to support themselves and their families.

Nadia Shams, Senior Assistant Director at Dnet, Bangladesh, presents her project; the “InfoLady” model. This model is specifically tailored to provide assistance to thousands of rural female entrepreneurs through a variety of door step services. The InfoLadies are currently operating in 19 districts in Bangladesh; with a a service package designed by Dnet, consisting of 80 different services under eight different categories, which include health, family planning, agriculture, employment, finance, marketing advice, legal and ICT.

InfoLadies also spread awareness for 6 different groups, namely farmers, labor, elderly, women, children, and adolescent girls. In addition to providing the InfoLadies with the necessary equipment, being associated with a local organization or NGO helps the InfoLadies to strengthen their customer base in the community through creating reputation credibility.

The InfoLady model is currently being scaled up nationally in Bangladesh and has great potential of being replicated in other countries as well; through adjusting it according to country-specific dimensions including the market, culture, infrastructure… etc.  Dnet plans to have 12,000 InfoLadies operating throughout Bangladesh by year 2017.

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Awarding innovative development research and ideas

Winners of the Global Development Awards and Medals Competition 2012

Launched in 2000 with the support of the Government of Japan, the Global Development Awards and Medals Competition aims to recognize innovative ideas and to encourage talented young researchers. This year, 12 finalists had the opportunity to present their papers, research proposals and projects on inequality, social protection and inclusive growth at GDN 14th Annual Conference. Interesting discussions emerged throughout the conference’s plenaries and parallel sessions where researchers presented their innovative work.

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Grappling with the concept of inclusive growth

By Felipe F. Salvosa II, Publications Division Chief, Philippine Institute for Development Studies

Closing Plenary

Panel at the closing plenary of the Annual Global Development Conference ‘Concluding Rountable’

After three days, what has come out of the 14th Annual Global Development Conference is that inclusive growth remains the goal, but the scope is still very wide on how best to achieve it. The world’s top development researchers will continue to grapple with this critical question and how inclusivity should dovetail with inequality and social protection as they leave the host city Manila.

The closing roundtable was an occasion for the leadership of The Global Development Network (GDN), and indeed the rest of the delegates, to reflect on these very issues. Tasked to set things in perspective were L. Alan Winters, the GDN Chairman; GDN President Pierre Jacquet; and regional networks heads Randall Filer, Ahmed Galal, Mustafa K. Mujeri, Biman C. Prasad, Roberto Rigobon, Lemma Senbet, Pavlo Sheremeta, and Josef T. Yap.

Rigobon of the Latin American and Caribbean Economic Association notes that development research is the toughest area and the challenge is two-fold: to be sound and relevant. Economists are often preoccupied with running models and experiments that have no external validity when what is really needed is a commonsense approach.

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Toward a more resilient society: Perspective of young Asian researchers

By Danileen Kristel Parel, Supervising Research Specialist, Philippines Institute for Development Studies (PIDS)

Major issues and shocks to the socio-economic, political, psychological state, as well as shocks to the environment, have significant effects to development. Resilience, which focuses on how vulnerable a system is to a shock and how long it takes to get back to its original state, serves as a powerful lens to view issues from a fresh perspective. The concept of resilience, which has drawn a wide range of definitions and usages, can be looked from several different angles. The four presentations shared during the 14th Annual Global Development Conference focus on the different views and ways the concept of resilience can be used. Four research paper proposals were presented, each one focusing on disaster risk reduction in four different countries, namely Vietnam, Philippines, Indonesia, and Thailand.

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Africa’s challenge: The ‘jobless growth’

Edited by Zeinab Sabet and Shahira Emara

For over 40 years, Africa has not witnessed such a rapid growth as recently. Out of the world’s 10 fastest growing economies, 6 are African! However, such growth is not always coupled with a decrease in inequality or a remarkable reduction in poverty. While some African countries have experienced growth with significant reduction in poverty, poverty rate remains high in most countries regardless of their economic performance. In the latter cases, growth has been even named by some studies ‘jobless growth’. This is where the African challenge remains.

Witness Simbanegavi, Director of Research at the African Economic Research Consortium, argues that growth is not being channelled in the right way to benefit the vulnerable people. On the other hand, and unlike the Latin American region, Africa lacks strong social protection policies. According to Simbanegavi, what Africa needs now is a pro-poor growth coupled with improved social protection policies; only this paradigm can lead to an enhancement of the welfare of the poorest.

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Inclusiveness and human development: The hidden linkage?

Unlike economic growth and national income which have been used ever since to measure economic development, human development indicators have a relatively short history. Development progress of countries has been measured only since the 1990s through health, education and standard of living.

Indian population represents 17% of the world population, and 33% of the global poor. Using the Indian case, Hippu Salk Kristle Nathan (National Institute of Advanced Studies – NIAS) and Srijit Mishra (Indian Gandhi Institute of Development Research – IGIDR) attempt to investigate inclusiveness using human development indicators across different socio-economic groups (class, caste, gender, etc…) of Indian population.

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EdPlaCo-MK – A tool for greater gender wage equality in Macedonia

It goes without saying that research on economic and social development nurtures the debate within the development community. However, one should question the added value of evidence-based research in the policymaking process. An outstanding research proposal was presented and discussed yesterday at the GDN 14th Annual Conference on Inequality, Social Protection and Inclusive Growth.

Macedonian labor market shows a relatively large gender employment and participation gaps, coupled with considerable gender wage inequality. Marjan Petreski and Nikica Mojsoska Blazevski, (University American College Skopje, Macedonia) presented today his research proposal “EdPlaCo-MK – A tool for greater gender wage equality in Macedonia”. The research proposal aims at contributing to reduce the gender wage gap in the Macedonian labor market. An assessment of the gender wage gap will be conducted, taking into consideration the different characteristics of the working-age males and females in Macedonia, as well as the effect of the high inactivity and unemployment of the low-skilled women on the gender wage gap.

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