Friday, May 10, 2013

What is the HDI?

The Human Development Index (HDI) is a summary composite index that measures a country's average achievements in three basic aspects of human development: health, knowledge, and income. It was first developed by the late Pakistani economist Mahbub ul Haq with the collaboration of the Nobel laureate Amartya Sen and other leading development thinkers for the first Human Development Report in 1990. It was introduced as an alternative to conventional measures of national development, such as level of income and the rate of economic growth.

The original HDI methodology was revised in 2010 for the 20th anniversary edition of the Human Development Report. How is it different?
The HDI remains a composite index that measures progress in the three basic dimensions—health, knowledge and income. Under the previous HDI formula, health was measured by life expectancy at birth; education or “knowledge” by a combination of the adult literacy rate and school enrolment rates (for primary through university years); and income or standard of living by GDP per capita adjusted for purchasing-power parity (PPP US$).
Health is still measured by life expectancy at birth. But the 2010 HDI measured achievement in knowledge by combining the expected years of schooling for a school-age child in a country entering school today with the mean years of prior schooling for adults aged 25 and older. The income measurement, meanwhile, has changed from purchasing-power-adjusted per-capita Gross Domestic Product (GDP) to purchasing-power-adjusted per-capita Gross National Income (GNI); GNI includes some remittances, providing a more accurate economic picture of many developing countries.
Why did the Report change the indicators for measuring education and income?
The indicators were changed for several reasons. For example, adult literacy used in the old HDI (which is simply a binary variable, literate or illiterate, with no gradations) is an insufficient measure for knowledge achievement. By including average years of schooling and expected years of schooling, one can better capture the level of education and recent changes.
Gross Domestic Product (GDP) is the monetary value of goods and services produced in a country irrespective of how much is retained in the country. Gross National Income (GNI) expresses the income accrued to residents of a country, including some international flows, and excluding income generated in the country but repatriated abroad. Thus, GNI is a more accurate measure of a country’s economic welfare. As shown in the 2010 Report, significant differences could exist between the income of a country’s residents, measured by GNI or GDP.

Why does the HDI not include dimensions of participation, gender and equality?
As a simple summary index, the HDI is designed to reflect average achievements in three basic aspects of human development – leading a long and healthy life, being knowledgeable and enjoying a decent standard of living. The policy of the Human Development Report Office has always been to construct additional complementary composite indices for covering some of the “missing” dimensions in the HDI. Gender disparity, inequality and human deprivation are measured by other indices (see Gender Inequality Index, Multidimensional Poverty Index and Inequality-adjusted HDI). Participation and other aspects of well-being are measured using a range of objective and subjective indicators and are discussed in the Report. Measurement issues related to these aspects of human development demonstrate the conceptual and methodological challenges that need to be further addressed.

What are the criteria for a country to be included in the HDI?
The Human Development Report Office strives to include as many UN member countries as possible in the HDI. To include a country in the HDI we need recent, reliable and comparable data for all three dimensions of the Index. For a country to be included, statistics should ideally be available from the relevant international data agencies.

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