HDI: Human Development Index

HDI – Putting people before markets

What is HDI?
It is a measure of economic development. It compromises of three equally weighted components. It gives a single numerical value between 0-1 and the higher the value the more developed the nation.

What are the components of HDI?

  1. Education – years if schooling and literacy 
  2. Health – Mortality rates
  3. Real GDP per capita at PPP – i.e. real GDP person at PPP (taking into account different costs of living)

What are the advantages and disadvantages of HDI?

Advantages
Disadvantages 
Political competitiveness
Does not take into account poverty or other measures of deprivation 
More factors and reliable ones 
PPP values change very quickly and are likely to be inaccurate or misleading.
easy and cheap to collect data
Still very little sense of income distribution with this measure.
Sign of welfare in the future because improving health and education are both supply-side policies which can indicate the long-term patterns of AS curve 
Quality of life does not seem to be that closely linked with it and we don’t get to taken into account things like war or political oppression.
The success of government policy can also be seen
Human development altogether is difficult to measure and is based on normative economics. Other measures such as access to internet might be more important.
As it is one value it allows statistical analysis and other modeling to be done and is altogether a practical measure.
Changes over time – ceteris paribus 
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