Introduction to Indices of Human Development:

1
Introduction to Indices of Human Development

• USAID Reform Project
• Dr. Brijesh C. Purohit
• November 2005

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• Quality of Life
• Human Development Index (HDI),
• Gender Disparity Index (GDI),
• and
• Economics of Happiness

3

• The well-being or quality of life of a population
  is an important concern in
• economics and political science.
• There are many components to well-being.
• A large part is standard of living, the amount of
  money and
• access to goods and services that a person has
• these numbers are fairly easily measured.
• Others like freedom, happiness, art,
  environmental health, and innovation
• are far harder to measure.

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Measuring quality of life

• quality-adjusted life years(QALYs)
• disability-adjusted life years' (DALYs)
• A number of groups and agencies around the world
  have tried to develop ways of assessing quality
  of life
• The Economist Quality-of-life index
• Vanderford-Riley well being schedule
• Physical quality-of-life index
• UN Human Development Index
• Genuine Progress Indicator
• Gross National Happiness

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• The measures often used in the study of health
  care are
• 'quality-adjusted life years' (QALYs) and
• the related 'disability-adjusted life years'
  (DALYs)
• both equal 1 for each year of full-health life,
  and less than 1 for various degrees of illness
• or disability.
• Thus the cost-effectiveness of a treatment can be
  assessed
• by the cost per QALY or DALY it produces
• for example, a cancer treatment which costs
  10,000 and on average gives the patient
• 2 extra years of full health costs 5000 per
  QALY.
• Assessing treatments in this way avoids the much
  greater problems associated

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• Quality-adjusted life years, or QALYs, are a
  measure of the benefit of a medical
• intervention.
• It is based on the number of years of life that
  would be added by the intervention.
• Each year in perfect healh is assigned the value
  of 1.0 down to a value of 0 for death.
• If the extra years would not be lived in full
  health, for example if the patient would
• lose a limb, or be blind or be confined to a
  wheelchair, then the extra life-years are
• given a value between 0 and 1 to account for
  this.
• QALYs are controversial as the measurement is
  used to calculate
• the allocation of healthcare resources based upon
  a ratio of cost per QALY.
• As a result some people will not receive
  treatment as it is calculated that the benefit to
• their quality of life is not warranted by the
  cost.

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• Another method of measuring quality of life is by
  subtracting the "standard of living",
• according to the technical definition of the
  term.
• For example, people in rural areas and small
  towns are generally reluctant to move
• to cities, even if it would mean a substantial
  increase in their standard of living.
• One can thus see that the quality of life of
  living in a rural area is of enough value
• to offset a higher standard of living.
• Similarly people must be paid more to accept jobs
  that will lower their quality of life,
• night jobs, ones with extensive travel all pay
  more and the difference in salaries can
• also give a measure of the value of quality of
  life.

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THE WORLD IN 2OO5The Economist Intelligence
Unitsquality-of-life index

• numerous attempts to construct alternative,
  non-monetary indices of social and economic
  wellbeing in a single statistic a variety of
  different factors that could influence quality of
  life.
• The main problem in all these measures is
• selection bias and arbitrariness in the factors
  that are chosen to assess quality of life
• in assigning weights to different indicators
  (measured
• on a comparable and meaningful scale) to come up
  with
• a single synthetic measure.

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Life-satisfaction surveys

• These surveys ask people the simple question of
  how satisfied
• they are with their lives in general.
• A typical question is,
• On the whole are you very satisfied, fairly
  satisfied, not very satisfied, or not at all
  satisfied with the life you lead?

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• The survey results have on the whole proved far
  more reliable and informative
• survey results as a starting point,and a means
  for deriving weights for the various determinants
  of quality of life across countries
• The average scores from comparable
  life-satisfaction surveys (on a scale of one to
  ten) can be assembled for 1999 or 2000 for 74
  countries.
• These scores are then related in a multivariate
  regression
• to various factors that have been shown to be
  associated
• with life satisfaction in many studies.

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• As many as nine factors survive in the final
  estimated equation (all
• except one are statistically significant
• the weakest, gender equality
• Together these variables explain more than 80 of
  the inter-country variation in life-satisfaction
  scores.
• A number of other variables had no impact in this
  multivariate framework.
• These were
• education levels,
• rate of real gdp growth and
• income inequality
• (Gini coeffi cient).

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Determinants of quality of life

• The Economist Intelligence Units index
• 1. Material wellbeing
• gdp per person
• 2. Health
• Life expectancy at birth, years.
• 3. Political stability and security
• Political stability and security ratings
• 4. Family life
• Divorce rate (per 1,000 population), converted
  into index
• of 1 (lowest divorce rates) to 5 (highest

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Determinants of quality of life

• 5. Community life
• Dummy variable taking value 1 if country has
  either high
• rate of church attendance or trade-union
  membership zero
• Otherwise
• 6. Climate and geography
• Latitude, to distinguish between warmer and
  colder climes.
• 7. Job security
• Unemployment rate, .
• 8. Political freedom
• Average of indices of political and civil
  liberties. Scale of 1
• (completely free) to 7
• 9. Gender equality
• Ratio of average male and female earnings

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Economist.com Quality-of-life
survey weights
weights Material wellbeing 11.5
18.8 Health 15.0
19.0 Family relations
14.3 11.3 Job security
11.9 7.7 Social Comm.
Activities 10.9
12.2 Political freedom Sec. 25.3
26.2 Gender equality
11.1 4.7
100.0 100.0
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Quality of life GDP per person Difference Score
Rank (at PPP) Rank in ranks Ireland
8.333 1 36,790 4 3 Switzerland
8.068 2 33,580 7 5 Norway 8.051 3 39,590 3 0 L
uxemborg 8.015 4 54,690 1 -3 Sweden
7.937 5 30,590 19 14 Australia
7.925 6 31,010 14 8 Iceland 7.911 7 33,560 8 1
Italy 7.810 8 27,960 23 15 Denmark
7.796 9 32,490 10 1 Spain 7.727 10 25,370 24 14
Singapore 7.719 11 32,530 9 -2 Finland
7.618 12 29,650 20 8 USA 7.615 13 41,529 2 -11
Canada 7.599 14 34,150 5 -9 N. Zealand
7.436 15 25,110 25 10 Nerlands
7.433 16 30,920 15 -1 Japan 7.392 17 30,750 16
-1 H. Kong 7.347 18 31,660 11 -7
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Quality of life GDP per person Difference
Score Rank (at PPP) Rank in ranks
UAE 5.899 69 18,330 33 -36 Libya 5.849 70 10,060
53 -17 Indonesia 5.814 71 3,840 90 19 S
Arabia 5.767 72 11,110 49 -23 India 5.759 73 3,29
0 96 23 Paraguay 5.756 74 3,600 95
21 Jordan 5.675 75 4,510 83 8 Nicaragua 5.663 7
6 2,600 99 23 Bangldesh 5.646 77 1,660 105
28 Albania 5.634 78 5,260 78 0 D
Republic 5.630 79 6,610 72 -7 Egypt 5.605 80 3,9
30 88 8 Algeria 5.571 81 5,770 76 -5 Bolivia 5.
492 82 3,680 94 12 Tunisia 5.472 83 7,910 64 -19
Serbia 5.428 84 6,079 75 -9 Armenia 5.422 85
3,993 87 2 Azerbaijan 5.377 86 4,628 81
-5 Georgia 5.365 87 3,841 89
2 Iran 5.343 88 7,630 65 -23 Macedonia 5.337 89
7,499 66 -23 Guatemala 5.321 90 4,050 85
-5 Honduras 5.250 91 2,740 98 7 S
Africa 5.245 92 10,810 50 -42 Pakistan 5.229 93
2,340 101 8
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• The Vanderford-Riley well-being schedule a
  measure of well-being
• It is objective in the sense that the subjective
  standard of well-being used in
• the schedule is measured objectively.
• The schedule is as follows
• Per capita FTE (Full-time equivalents the number
  of hours worked per person,
• an average of 40 hours per week, constitutes 1.0
  FTE)
• Value of equity in property per person
• Ratio of property owners to non-owners (as
  defined as no outstanding liens
• or balance on property)
• Ratio of self-employment to total employment
• A more recent development in the schedule has
  been the inclusion, for the United States,of the
  US Census' Meeting Basic Needs scale.
• The ratio of the population meeting those basic
  needs defined by the Census is now tracked by the
  Vanderford-Riley schedule.

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• Physical quality-of-life index(PQLI)
• measureof the quality of life or well-being of a
  country.
• The value is a single number derived from
• basic literacy rate,
• infant mortality,and
• life expectancy at age one,
• all equally weighted on a 0 to 100 scale.
• developed for the Overseas Development Council
  in 1979 by Morris Davis Morris, as one of a
  number of measures created due to dissatisfaction
  with the use of GNP as a indicator of
  development.
• PQLI might be regarded as an improvement
• but shares the general problems of measuring
  quality of life in a quantitative way. It has
  also been criticized because there is
  considerable overlap between infant mortality and
  life expectancy.

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Human Development Index

• World map indicating HDI of nation-states, 2005.
• The colour generalisation graduates from
• green (for high development),
• to yellow and orange (for medium development),
• to red (for low development).

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• The UN Human Development Index (HDI)
• It is a comparative
• measure of poverty, literacy, education, life
  expectancy,
• and other factors for countries worldwide.
• It is a standard means of measuring well-being,
  especially child welfare.
• The index was developed in 1990 by the Pakistani
  economist Mahbub ul Haq,
• used since 1993 by the United Nations
  Development Programme in its
• annual report.

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• The HDI measures the average achievements in a
  country
• in three basic dimensions of human development
• A long and healthy life, as measured by life
  expectancy at birth.
• Knowledge, as measured by the adult literacy rate
  (with two-thirds weight) and
• the combined primary, secondary and tertiary
  gross enrollment ratio
• (with one-third weight )
• A decent standard of living, as measured by gross
  domestic product (GDP)
• per capita at purchasing power parity (PPP) in
  USD.
• Each year, countries are listed and ranked
  according to these measures.

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• Method used to calculate the Human Development
  Index 2005 report
• Top thirty countries
• Bottom ten countries
• Top/bottom three countries by continent

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CALCULATING THE HUMAN DEVELOPMENT INDICES
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Top thirty countries
Number in parentheses indicates change in rank
since last report.
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Bottom ten countries
168.Mozambique (? 3)
169. Burundi (? 4)
170. Ethiopia ()
 171.Central African Republic (? 2)
 172.Guinea-Bissau ()
 173.Chad (? 6)
 174.Mali ()
175. Burkina Faso ()
176. Sierra Leone (? 1)
177. Niger (? 1)
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Top/bottom three countries by continent
Africa
 51.Seychelles (? 16)
 58.Libya ()
65. Mauritius (? 1)
175. Burkina Faso ()
 176.Sierra Leone (? 1)
177. Niger (? 1)
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Top/bottom three countries by continent

• Africa
• 51.  Seychelles (? 16)58.  Libya ()65.
   Mauritius (? 1)...175.  Burkina Faso ()176.
   Sierra Leone (? 1)177.  Niger (? 1)

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Top/bottom three countries by continent

• Asia
• 11.  Japan (? 2)22.  Hong Kong (? 1)23.
   Israel (? 1)...139.  Bangladesh (? 1)140.
   East Timor (? 18)151.  Yemen (? 2)

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Top/bottom three countries by continent

• Europe
• 1.  Norway ()2.  Iceland (? 5)4.
   Luxembourg (? 11)...100.  Georgia (? 3)101.
   Azerbaijan (? 10)115.  Moldova (? 2)

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Top/bottom three countries by continent

• North America
• 5.  Canada (? 1)10.  United States (?
  2)30.  Barbados (? 1)...116.  Honduras (?
  1)117.  Guatemala (? 4)153.  Haiti ()

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Top/bottom three countries by continent

• Oceania
• 3.  Australia ()19.  New Zealand (? 1)54.
   Tonga (? 9)...118.  Vanuatu (? 11)128.
   Solomon Islands (? 4)137.  Papua New Guinea (?
  4)

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Top/bottom three countries by continent

• South America
• 34.  Argentina ()37.  Chile (? 6)46.
   Uruguay ()...88.  Paraguay (? 1)107.  Guyana
  (? 3)113.  Bolivia (? 1)

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Past top countries

• 2004 Norway
• 2003 Norway
• 2002 Norway
• 2001 Norway
• 2000 Canada
• 1999 Canada
• 1998 Canada
• 1997 Canada
• 1996 Canada
• 1995 Norway
• 1994 Canada
• 1993 Japan
• 1992 Canada
• 1991 Japan
• 1990 Canada
• 1985 Canada
• 1980 Switzerland

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• Millennium Development Goal
•  
• Goals and targets
•  
• Goal 1 Eradicate extreme poverty and hunger
• Target 1
• Halve, between 1990 and 2015, the proportion of
  people
• whose income is less than 1 a day
•  
• Target 2
• Halve, between 1990 and 2015, the proportion of
  people
• who suffer from hunger
•  
• Goal 2 Achieve universal primary education
• Target 3
• Ensure that, by 2015, children everywhere, boys
  and girls alike,
• will be able to complete a full course of primary
  schooling

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• Goal 3 Promote gender equality and empower women
• Target 4
• Eliminate gender disparity in primary and
  secondary education, preferably by 2005, and to
  all levels of education no later than 2015
•  
• Goal 4 Reduce child mortality
• Target 5
• Reduce by two thirds, between 1990 and 2015, the
  under-five mortality rate
•  
• Goal 5 Improve maternal health
• Target 6
• Reduce by three quarters, between 1990 and 2015,
  the maternal mortality ratio
•  
• Goal 6 Combat HIV/AIDS, malaria and other
  diseases
• Target 7
• Have halted by 2015 and begun to reverse the
  spread of HIV/AIDS

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• Target 8
• Have halted by 2015 and begun to reverse the
  incidence
• of malaria and other major diseases
•  
•  
• Goal 7 Ensure environmental sustainability
• Target 9
• Integrate the principles of sustainable
  development into
• country policies and programmes and reverse the
  loss of
• environmental resources

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Human Development Index for India Combined
 
 
 
 
 
 
 
 
States/UTs
1981
1981
1991
1991
2001
2001
 
Value
Rank
Value
Rank
Value
Rank
A.Pradesh
0.298
9
0.377
9
0.416
10
Assam
0.272
10
0.348
10
0.386
14
Bihar
0.237
15
0.308
15
0.367
15
Gujarat
0.360
4
0.431
6
0.479
6
Haryana
0.360
5
0.443
5
0.509
5
Karnataka
0.346
6
0.412
7
0.478
7
Kerala
0.500
1
0.591
1
0.638
1
M.Pradesh
0.245
14
0.328
13
0.394
12
Maharashtra
0.363
3
0.452
4
0.523
4
Orissa
0.267
11
0.345
12
0.404
11
Punjab
0.411
2
0.475
2
0.537
2
Rajasthan
0.256
12
0.347
11
0.424
9
Tamil Nadu
0.343
7
0.466
3
0.531
3
Uttar Pradesh
0.255
13
0.314
14
0.388
13
West Bengal
0.305
8
0.404
8
0.472
8
All India
0.302
 
0.381
 
0.472
 
Note The HDI for 2001 has been estimated only for
a few selected States for which
some data, including the Census 2001, was
available. The assumptions that have been
made for HDI 2001 are indicated in the Technical
Appendix.
 
 
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States Grouped According to Selected
Indicators Human Development Index(HDI)
Infrastructure Index (II)
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(Jharkhand)
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Grants-in-aid for Education Sector (major head
2202) (Rs. in
crore) State 2005-06 2006-07 2007-08
2008-09 2009-10 2005-10 1 2
3 4 5 6
7 Assam 183.20 200.60 219.66
240.53 263.38 1107.37 Bihar
443.99 486.17 532.36 582.93
638.31 2683.76 Jharkhand 107.82 118.06
129.28 141.56 155.01 651.73 M.
P. 76.03 83.25 91.16
99.82 109.30 459.56 Orissa
53.49 58.57 64.13
70.22 76.89 323.30 Rajasthan 20.00
20.00 20.00 20.00 20.00
100.00 U. P. 736.87 806.87
883.52 967.45 1059.36
4454.07 W.B. 64.83 70.99
77.73 85.11 93.20 391.86 Total
1686.23 1844.51 2017.84 2207.62
2415.45 10171.65
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Grants-in-aid for Health Sector (major head 2210
2211) (Rs. in
crore) State 2005-06 2006-07
2007-08 2008-09 2009-10 2005-10
1 2 3 4 5
6 7 Assam 153.58
171.24 190.93 212.89 237.38
966.02 Bihar 289.30 322.57 359.66
401.02 447.14 1819.69 Jharkhand 57.39
63.99 71.35 79.55 88.70
360.98 MP 28.88 32.20 35.90
40.03 44.63 181.64 Orissa 31.22
34.81 38.81 43.28
48.25 196.37 UP 367.63
409.90 457.04 509.60 568.21 2312.38 UtK
10.00 10.00 10.00 10.00
10.00 50.00 Total 938.00
1044.71 1163.69 1296.37
1444.31 5887.08
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Genuine Progress Indicator

• The Genuine Progress Indicator (GPI)
• a concept in green economics and welfare
  economics that has been suggested as a
  replacement metric for gross domestic product
  (GDP) as a metric of economic growth.
• it is claimed ..more reliably distinguish
  uneconomic growth - harmful
• A GPI is an attempt to measure whether or not a
  country's growth, increased production of goods,
  and expanding services have actually resulted in
  the improvement of the welfare (or well-being) of
  the people in the country.
• Accordingly for example, the GPI will be zero if
  the increases in dollar costs of crime and
  pollution equal the total dollar rise in
  production of goods and services, all other
  factors being constant.

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Activists

• Scandinavia
• Netherlands
• France
• Germany

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Applying the Genuine Progress Indicator to
legislative decisions

• The best known attempt to apply a GPI to
  legislative decisions is probably the GPI
  Atlantic indicator pioneered by Ronald Colman for
  Nova Scotia, and
• the ecological and social indicators used by the
  Government of Canada to measure its own progress
  to achieving well-being goals
• its Environment and Sustainable Development
  Indicators Initiative (Canada) is a substantial
  effort to justify state services in GPI terms.
• It assigns the Commissioner for the Environment
  and Sustainable Development (Canada)), an officer
  in the Auditor-General of Canada's office, to
  perform the analysis and report to the House of
  Commons

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• This has not satisfied the stricter advocates of
  GPI, however
• Canada continues to state its overall budgetary
  targets in terms of reducing
• its debt to GDP ratio, which implies that GDP
  increase and debt reduction in
• some combination are its main priorities.
• And not all parties believe that anything less
  than total commitment
• of the A-G's office only to the "genuine"
  indicators can achieve the goals
• Despite the efforts of local communities to
  achieve more sustainable development,
• Canada lacks a federal Genuine Progress Indicator
  (GPI),
• said Green Party of Canada leader Jim Harris.
• Measuring well being through GPI is
• the first step to forming solid solutions to
  problems facing our communities, said Harris.
• Indicators such as Gross Domestic Product (GDP)
  show financial growth
• without taking into account harmful activities
  such as crime and pollution.

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• In the EU the Metropole efforts and the London
  Health Observatory methods
• are equivalents focused mostly on urban
  lifestyle.
• The EU and Canadian efforts are among the most
  advanced
• in any of the G8 or OECD nations,
• but there are parallel efforts
• to measure quality of life or standard of living
  in health (not strictly wealth)
• terms in all developed nations.
• This has also been a recent focus
• of the labour movement.

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Gross national happiness

• Gross National Happiness (GNH) is an attempt to
  define a standard of living in more holistic and
  psychological terms than Gross National Product.
• The term was coined by Bhutan's King Jigme Singye
  Wangchuck in 1972.
• It signalled his commitment to building an
  economy that would serve Bhutan's unique culture
  based on Buddhist spiritual values.
• Like many worthy moral goals it is somewhat
  easier to state than to achieve, nonetheless, it
  serves as a unifying vision for the Five Year
  planning process and all the derived planning
  documents that guide the economic and development
  plans to the country.

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One of many alternative indicators

• Unlike the Genuine Progress Indicator which
  actually tries to measure well-being, the GNH
  does not attempt to quantify happiness.
• The two measures agree, however, that well-being
  is more relevant and important than consumption.
• GNH depends on a series of subjective judgements
  about moral values.
• In practice this means that it is open to whoever
  defines the frame of reference, invariably
  governments, to define GNH in a way that suits
  their interests.

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Happiness as an Objective

• Happiness has organically evolved from?
• the constituent features of Bhutanese society
  before 1959, a socio-economic system based on a
  Buddhist and feudal set of values.
• does not contradict the fact that the substance
  of Gross National Happiness might have changed
  over time or
• might have been supplemented by outside concepts.

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The Determinants of Gross National Happiness

• Yardstick of Bhutanese development has always
  been emotional well-being
• rather than mere economic progress,
• influencing and determining factors of the
  concept.
• configuration and the interrelations of the
  dimensions of Bhutanese development are
  schematically demonstrated in the figure below.

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Conceptual building blocks of GNH arranged in
three levels

• according to their position in a cause-and-effect
  hierarchy.
• The uppermost level( level of superstructure)
  contains the input components (the influencing
  and determining factors) for the Bhutanese
  development concept.
• While the conceptual elements (people-centred or
  human
• development, self-reliance, cultural
  preservation and
• environmental preservation) of Gross
  National Happiness are
• a reflection of these determinants,
• they constituted at the same time the set of
  inputs for the operational level of Bhutanese
  development i. e. the level of policies and
  projects.

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The aim not economic efficiency, but
maximization of happiness

• According to GNH concept
• objectives of market economics, i.e., increasing
  consumption and accelerating growth are thus only
  relevant as means to an entirely different end
  human well-being.
• Besides, Buddhist moral philosophy provides a
  definition of happiness that well being be drawn
  from the harmonization of spiritual and material
  aspects of life.

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• Hence Buddhism as the single most important
  determinant
• for the Bhutanese value base furnished the core
  concept for
• Gross National Happiness,
• the perception of human well being as the
  fundamental objective of economic activity.
• This also turns the criticism of western
  economists, who smile
• about the economic inefficiency of Gross
  National
• Happiness, highly irrational.
• They miss the point

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• The human orientation of development has resulted
  in
• Bhutans commitment to the rapid enhancement of
  the
• populations health and education
• Bhutans perception?
• that development ought to be people-centered,
• should invest scarce resources in social
  facilities
• (rather than in industrialization or the
  diversification of the
• economy to generate growth)
• fostering modern social services,
• Thus GNH as a revolution in development thinking.

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• Bhutans indigenous conservation ethic provided a
  major
• input for Gross National Happiness and was
  perhaps the
• most consistently applied aspect of the concept.
• some examples?
• As early as 1961?
• the National Assembly resolved that trees in the
  ground should be
• exempted from taxation to discourage felling in
  keeping with
• the Governments conservation policy.
• The same rationale led to?
• legislation such as the Forest Act of 1969
• the Land Act of 1979
• which contains the peculiar provision that the
  government owns all trees, including those
  growing on private land.

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• In 1974?
• preservation policy was underscored by declaring
  vast sanctuaries,
• parks and forest reserves as protected areas.
• Today, protected areas constitute about 26 per
  cent of Bhutans territory.
• Elsewhere, Bhutan never exploited its natural
  resources on
• grounds of commercial profitability.
• Self-reliance and Paternalism
• Bhutans traditional socio-economic system?
• based on the principle of communal
  self-reliance.
• The population lived in scattered villages,
  hamlets and isolated farms

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• This corresponds to Buddhist doctrine?
• It points to the benevolent nature of small scale
• communities.
• Further the topographic constraints and the
  entire
• lack of infrastructure ?
• limited the interaction between the communities
  settled in the river valleys
• of the Inner Himalayas with those in the
  southern foothills and the
• outside world.
• In the absence of marketable surpluses
  trans-Himalayan and
• Indo-Bhutanese trade was reduced to a few
  necessities exchanged by barter.

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• However, among the valley communities
• there was vigorous exchange of goods facilitated
  by
• the migration of livestock and people from
  temperate settlements in summer
• to subtropical settlements in winter.
• As a result groups of neighboring communities
  formed self-sufficient units
• Due to the lack of foreign influences and the
  extremely stable social
• environment, indigenous institutions and systems
  of knowledge could evolve.
• Particularly in the field of local conflict
  resolution and the allocation of collective
  resources
• (e.g. rules about irrigation, use of community
  grazing land etc.) effective customary rules have
  developed over the centuries.

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• Since then, many policies bear the stamp of the
  centrality of self-reliance?
• the gradual shift to decentralization of
  development decision-making
• the reluctance to give up food self-sufficiency
  in favour of cash crop
• avoid dependency on external loans, etc.