When the world felt that evaluating a country's potential for individual human development provides a supplementary metric for evaluating a country's level of development the United Nation Development Program started using Pakistani economist Mahbub ul Haq’s created HDI.
HDI stands for Human Development Index.
It can be used to check various policy choices of nations; if, for example, two countries have approximately the same GNI, then why they produce widely disparate human development outcomes.
What is Human Development Index?
The Human Development Index (HDI) is a summary measure of average performance in key dimensions of human development.
What is Human Development Index?
The Human Development Index (HDI) is a summary measure of average performance in key dimensions of human development.
Indicators of HDI: A long and healthy life, Knowledge, and An Adequate standard of living.
It consists of four principal areas of interest:
It consists of four principal areas of interest:
- Mean years of schooling
- Expected years of schooling
- Life expectancy at birth
- Gross national Income per capita
This index is an instrument to track changes in the level of development over time and to compare the level of development in different countries.
Top 5 HDI Countries
- Norway
- Ireland
- Switzerland
- Hong-Kong
- Iceland
India ranked 131th position on of 189 countries in HDI report 2021.
There are two steps to calculate the HDI:
1. Forming Indices
- Values of each of the metrics are first normalized to an index value of 0 to 1. To do this, UNDP establishes "targets" of the maximum and minimum limits for each metric.
- Using the actual value for a specific country and the global maximum and minimum, the dimension value (indices) for each measured value is calculated as follows:
Life Expectancy Index (LI)
Life expectancy index of a country is calculated by the formulae:
LI=(life expectancy of a country -20) / (85-20)
Life expectancy of a country is the measure of how long the average person lives in a given country.
This is usually calculated by averaging out the age at which people die.
20 is the minimum and 85 is the maximum life expectancy at birth set by UNDP.
LI is 1, when life expectancy at birth is 85.
20 is the minimum and 85 is the maximum life expectancy at birth set by UNDP.
LI is 1, when life expectancy at birth is 85.
LI is 0 when life expectancy at birth is 20.
Education Index (EI)
Education Index is the mean of mean years of schooling Index and expected years of schooling Index.
EI=(mean years of schooling Index + expected years of schooling Index ) / 2
Mean years of schooling Index = (Actual Mean year of schooling - 0) / (15-0)
Actual mean years of schooling is the average number of completed years of education of a population.
15 is set as maximum limit of mean years of schooling by UNDP, 0 is set as the minimum limit.
Expected years of schooling Index = (Actual expected years of schooling - 0) / (18-0).
Expected years of schooling are the number of years a 2-year-old child is expected to spend in schooling, based on the school enrollment rates at a given date.
18 is set as maximum limit of expected years of schooling by UNDP, 0 is set as the minimum limit.
Income Index (II)
Income Index= {\displaystyle ={\frac {\ln({\textrm {GNIpc}})-\ln(100)}{\ln(75,000)-\ln(100)}}}ln(GNIpc) -ln(100) /ln(75,000) -ln(100)
Income Index is used to calculate income of the population of a country by using logarithms.
Income Index is 1 when GNI per capita is $75,000(being the maximum limit) and 0 when GNI per capita is $100(being the minimum limit).
The dimension index is therefore 1 of a country that achieves the maximum value and it is 0 for a country that has minimum value.
2-Aggregating to Calculate HDI
Once each of the indices have been calculated, they are aggregated to calculate the final Human development Index.
The HDI is the geometric mean (equally-weighted) of life expectancy Index, education Index, and Income Index, as follows:
HDI=∛(LI*EI*II)
Drawbacks of Human Development Index
The Human Development Index simplifies and captures only part of what human development entails.
Income Index is 1 when GNI per capita is $75,000(being the maximum limit) and 0 when GNI per capita is $100(being the minimum limit).
The dimension index is therefore 1 of a country that achieves the maximum value and it is 0 for a country that has minimum value.
2-Aggregating to Calculate HDI
Once each of the indices have been calculated, they are aggregated to calculate the final Human development Index.
The HDI is the geometric mean (equally-weighted) of life expectancy Index, education Index, and Income Index, as follows:
HDI=∛(LI*EI*II)
Drawbacks of Human Development Index
The Human Development Index simplifies and captures only part of what human development entails.
It does not take into account inequalities, poverty, human security, self-determination, etc.
Some Economists argue that a country has to spend large amount of money to gather the information required to calculate indices for HDI still HDI does not give accurate information on human development in a country.
They also pointed out the fact that lots of error occurs while updating and uploading the data which leads to wrong calculation of HDI.
Hence, we can say Human development Index can be a potential human Index that can be achieved if there is no inequality or poverty in a country but it cannot be termed as the actual level of human development.
Some Economists argue that a country has to spend large amount of money to gather the information required to calculate indices for HDI still HDI does not give accurate information on human development in a country.
They also pointed out the fact that lots of error occurs while updating and uploading the data which leads to wrong calculation of HDI.
Hence, we can say Human development Index can be a potential human Index that can be achieved if there is no inequality or poverty in a country but it cannot be termed as the actual level of human development.
Written By: Hamna Khan
Edited By: Komal Jha
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