Human Development Index (HDI) •

•

The Human Development Index is published by the UNDP and focuses on longevity, basic education and minimal income. It tracks progress made by countries in improving these three outcomes. The inclusion of education and health indicators is a sign of successful government policies in providing access to important merit goods such as health care, sanitation and education.

1. Knowledge: First an educational component made up of two statistics – mean years of schooling and expected years of schooling 2. Long and healthy life: Second a life expectancy component is calculated using a minimum value for life expectancy of 25 years and maximum value of 85 years. 3. A decent standard of living: The final element is gross national income (GNI) per capita adjusted to purchasing power parity standard (PPP). The UNDP classifies each country into one of three development bins: • • •

Low human development for HDI scores between 0.0 and 0.5, Medium human development for HDI scores between 0.5 and 0.8 High human development for HDI scores between 0.8 and 1.0.

Important note: GNI is now used rather than GDP because of the growing size of remittances in the global economy and also the importance of international aid payments. For example, because of remittances from abroad, GNI in the Philippines greatly exceeds GDP Log of income is used in the HDI calculation because income is instrumental to human development but higher incomes are assumed to have a declining contribution to human development

The Global Human Development Map for 2011

GNI per Capita - Purchasing Power Parity (PPP) This is a method of currency valuation based on the idea that two identical goods in different countries should eventually cost the same. This is illustrated by the Big Mac index, which takes a Big Mac hamburger and compares its prices in different countries in order to establish the relative value of their currencies. If PPP holds true, then you can buy the same goods and services with £100 in London as you can in Glasgow, New York and Cape Town. There are many reasons why this will not be the case! © Tutor2u Limited 2012/13

www.tutor2u.net

Currency speculation can make currencies volatile

Differences in the range of products available

Limitations of PPP exchange rates Different indirect taxes and subsidies

Variations in strength of competition

Human Development Index for 2010 A selection of data drawn from the Human Development Index is provided in the table below. Country

GNI per capita (2008 US$PPP)

Norway Australia United States Ireland Canada Sweden Germany Japan Korea (Republic of) France Spain Greece Italy United Kingdom Hungary Poland Chile Mexico Russian Federation Brazil China Sri Lanka Thailand South Africa India Kenya Bangladesh Nigeria Côte d'Ivoire Ethiopia Sierra Leone Niger Zimbabwe

© Tutor2u Limited 2012/13

58,809 38,691 47,093 33,077 38,668 36,936 35,308 34,692 29,517 34,340 29,661 27,580 29,619 35,087 17,472 17,803 13,561 13,971 15,258 10,607 7,258 4,886 8,000 9,812 3,337 1,627 1,587 2,156 1,624 992 808 675 176

HDI value

0.938 0.937 0.902 0.895 0.888 0.885 0.885 0.884 0.877 0.872 0.863 0.855 0.854 0.849 0.805 0.795 0.783 0.750 0.719 0.699 0.663 0.658 0.654 0.597 0.519 0.470 0.469 0.423 0.397 0.328 0.317 0.261 0.140

Inequalityadjusted HDI value (IHDI) 0.876 0.864 0.799 0.813 0.812 0.824 0.814 Not available 0.731 0.792 0.779 0.768 0.752 0.766 0.736 0.709 0.634 0.593 0.636 0.509 0.511 0.546 0.516 0.411 0.365 0.320 0.331 0.246 0.254 0.216 0.193 0.173 0.098

www.tutor2u.net

Life expectancy at birth (years) 81.0 81.9 79.6 80.3 81.0 81.3 80.2 83.2 79.8 81.6 81.3 79.7 81.4 79.8 73.9 76.0 78.8 76.7 67.2 72.9 73.5 74.4 69.3 52.0 64.4 55.6 66.9 48.4 58.4 56.1 48.2 52.5 47.0

Mean years of schooling (of adults) (years) 12.6 12.0 12.4 11.6 11.5 11.6 12.2 11.5 11.6 10.4 10.4 10.5 9.7 9.5 11.7 10.0 9.7 8.7 8.8 7.2 7.5 8.2 6.6 8.2 4.4 7.0 4.8 5.0 3.3 1.5 2.9 1.4 7.2

Note: IHDI: Inequality-adjusted HDI (a new measure introduced into 2010 Human Development Report)

Uneven progress but deep inequalities

• • • • • •

The world average HDI rose to 0.68 in 2010 from 0.57 in 1990, continuing the upward trend from 1970, when it stood at 0.48 The fastest progress has been in East Asia & the Pacific, followed by South Asia and Arab States. All but 3 of the 135 countries have a higher level of human development today than in 1970 The exceptions are the Democratic Republic of the Congo, Zambia and Zimbabwe From 1970 to 2010 real per capita income in developed countries increased 2.3 percent a year on average, compared with 1.5 percent for developing countries The real average income of people in 13 countries in the bottom quarter of today’s world income distribution is lower than in 1970

Progress in reducing extreme poverty

© Tutor2u Limited 2012/13

www.tutor2u.net

Limitations of the Human Development Index •

The HDI notably fails to take account of qualitative factors, such as cultural identity and political freedoms (human security, gender opportunities and human rights for example).

•

Many argue that the HDI should become more human-centred and expanded to include more dimensions, ranging from gender equity to environmental biodiversity

•

The GNP per capita figure – and consequently the HDI figure – takes no account of income distribution. If income is unevenly distributed, then GNP per capita will be an inaccurate measure of the monetary well-being of the people. Inequitable development is not human development.

•

PPP values change very quickly and are likely to be inaccurate or misleading

•

The 2010 edition of the Human Development Report marked the launch of a new Inequalityadjusted HDI and also a Gender Inequality Index and a Multidimensional Poverty Index

•

Inequality HDI - The average loss in the HDI due to inequality is about 23 percent—that is, adjusted for inequality, the global HDI of 0.682 in 2011 would fall to 0.525.

Key point: the HDI is intended to allow economists to draw broad conclusions about which countries enjoy relatively high standards of living, and which are, by comparison, under-developed.

© Tutor2u Limited 2012/13

www.tutor2u.net

Life Expectancy at Birth (years)

Are there diminishing returns from higher per capita incomes in terms of improving life expectancy?

Income (GDP) per capita The Multi-Dimensional Poverty Index (MDPI)

The Multidimensional Poverty Index was first introduced in 2010 and it an attempt designed to illustrate the many deprivations faced by the most severely disadvantaged. The MPI requires a household to be deprived in multiple indicators at the same time. A person is multi-dimensionally poor if the weighted indicators in which he or she is deprived add up to at least 33%. The MPI is closely linked to the Millennium Development Goals targets and includes ten components: 1. 2. 3. 4. 5. 6. 7.

Possession of some assets Nutrition Child mortality Access to drinking water Access to sanitation Access to a safe room Access to electricity

© Tutor2u Limited 2012/13

www.tutor2u.net

8. Access to an improved cooking oil 9. Years of schooling 10. Children enrolled in school

© Tutor2u Limited 2012/13

www.tutor2u.net