Human Development Index (HDI): what is it and how is it calculated?
Fri, 06. Nov 20
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Date: Friday, 06. November 2020
Time: 12 o'clock
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Location: New York
Street: New York
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This may make us think that this is an indicator of the wealth of a country, but this idea is not entirely correct.
The Human Development Index takes into account different factors that are considered necessary for people to live fully in the country where they live. Below we will see in more depth this concept, what it is based on, how it is calculated and what criticism it has received.
What is the Human Development Index?
The Human Development Index (HDI) is an indicator born from the United Nations Development Program (UNDP) that serves to assess how developed a society is. It consists of an arithmetic measure that synthesizes the advances and milestones of each country that lead it to have a better society, analyzed based on three main dimensions: hope, education and economic wealth.
The main objective of this indicator is to obtain objective data on the standard of living in each country of the world in order to detect possible deficiencies and direct future international aid programs to resolve them . Among these aids can include offering monetary resources to activate the economy, in addition to helping the country in providing educational and health structures to improve the cultural and health level of the population.
We have the origins of the concept in 1990, the year in which Mahbub ul Haq launched the United Nations Development Program (UNDP). This program not only intended to take into account purely economic factors corresponding to the wealth of a country, but also what policies the state applies that are people-centered, especially in terms of quality of life and education.
What is meant by human development?
Human development is understood to be the process that a society goes through when there are improvements in the living conditions of its citizens. These improvements not only imply an increase in the assets they have, which, undoubtedly, will help them meet their basic needs such as food, housing and transportation.
It also implies the creation of an environment in which the human rights of each and every citizen residing in the country are respected , their right to education and to have a decent life . Thus, greater human development can be understood as synonymous with a high degree of freedom and a number of options available to be or do what you want.
The dimensions of the human development index
As we have already mentioned, this index is based on three dimensions, considered as factors that determine whether a society is fully developed or not.
1. Life expectancy
This measure is based, basically, on the average number of years that a person is expected to live because they were born and lived in their country . This measure also includes having access to adequate health services that facilitate living a long and healthy life.
2. Education
The dimension of education evaluated in the human development index is based on the amount of writer that are available to do my homework, the gross rate combined with enrollment in education at different levels (primary, secondary and higher), as well as the years of duration of compulsory education.
3. Economic wealth
Economic wealth is measured based on gross domestic product (GDP) per capita .
How is the HDI calculated?
The calculation of the human development index is done taking into account several measures corresponding to life expectancy, education and wealth. That is why each year the UNDP collects data from different UN programs to develop this indicator.
Among the sources consulted are UNDESA, which measures life expectancy at birth, UNESCO, ICF Macro Demographic and Health Surveys, UNICEF and OECD surveys, which measure expectancy and mean years of schooling, and the The World Bank, the IMF, and the United Nations Statistics Division, whose data indicate per capita gross domestic product.
When UNDP has the data for each country, first the dimension indices must be elaborated , values with which it will be possible to obtain the human development index itself. Each country can obtain the following scores for each dimension index:
Health. Life expectancy in years, 20 years (minimum) and 85 years (maximum)
Education. Expected years of schooling 0 years (min) and 18 (max), mean years of schooling 0 years (min) and 15 (max)
Entry. Gross domestic product per capita (2011 PPP $) 100 (min) and 75,000 (max)
Steps to follow
To calculate the dimension index of each specific case, the following formula is used:
Dimension index = (current value - minimum value) / (maximum value - minimum value)
The values of each dimension index seen above are not arbitrary. If a country has the maximum in everything, its HDI is 1 , which means that it has a very high level of development. On the other hand, if you have minimums in everything, your HDI will be 0.
The minimum value set for life expectancy is 20 , because, since the 20th century, there is evidence that no country on Earth has a life expectancy lower than that age. As for its maximum of 85 years, it is considered a realistic measure according to UNDP itself.
In education, both for the expected years of schooling and for the average, the minimum is 0. The expectation of years of schooling sets its maximum limit at 18 years, which is equivalent to having obtained a university degree in most of the countries of the world. On the other hand, average schooling sets its maximum at 15 years, which is the maximum projected for this indicator for the next few years.
Finally we have the GDP per capita, setting its minimum figure at 100 constant dollars under purchasing power parity (PPP) , and its maximum at 75,000 PPP dollars. The minimum is $ 100 because, even in countries where reliable income data has not been collected, that amount of income is needed to survive. On the contrary, the maximum is set at $ 75,000 because, based on studies by Kahneman and Deaton (2010), there are no significantly different gains in human development and well-being when GDP exceeds that figure.
Finally, once the indices of each dimension have been calculated, the Human Development Index itself is calculated, using the following formula :
- HDI = (Health Index X Education Index X Income Index) ^ ⅓
As we have already commented, the Education Index is based on two measures, the expectation of years of schooling and the average years of schooling. To calculate it, the arithmetic mean of the two components is carried out. Regarding the index on income, the variables in logarithms base 10 are taken into account to adjust the calculations .
Example of HDI calculation
Let's imagine an imaginary country with the following data:
- Life expectancy in years: 70 years
- Expected years of schooling: 12 years
- Average years of schooling: 8 years
- Gross domestic product per capita: $ 10,300
We first calculate the dimension indices for each of the three dimensions .
1. Health Index
- Health Index = (70 - 20) / (85 - 20) = 0.77
2. Education Index
- Expected years of schooling = (12 - 0) / (18 - 0) = 0.67
- Mean years of schooling = (8 - 0) / (15 - 0) = 0.53
- Education Index = 0.67 + 0.53 / 2 = 0.93
3. Income index
- Income Index = log (10,300) - log (100) / log (75,000) - log (100) = 0.70
Once the dimension indices have been calculated, only the final step remains : calculate the human development index.
4. Human Development Index
- HDI = (Health Index X Education Index X Income Index) ^ ⅓
We substitute in the formula:
- Human Development Index = (0.77 0.93 0.70) raised to 1/3 = 0.8
- Human Development Index Ratings
After researching and studying the characteristics of each sovereign state, the Human Development Index gives values to each of them . These values range between 0 and 1, and are organized in lists that go from highest to lowest degree of human development. The categories given to the country based on its score are as follows.
- Very high human development: scores above 0.80.
- High human development: scores between 0.700 and 0.799.
- Medium human development: scores between 0.550 and 0.699.
- Low human development: scores below 0.550.
Currently, the country with the highest human development index is Norway , with a score of 0.954, while the country with the lowest is Niger, with a score of 0.377.
Criticisms of this index
Although it has served a lot, especially to raise awareness that not only wealth determines how developed a country is, the Human Development Index has not been without controversy. There are many people who consider that this indicator is not a totally reliable magnitude.
To begin with, the HDI is just an indicator, it cannot encompass the entire reality that a society constitutes, leaving aside variables that may reflect a delicate situation in a country, no matter how good the educational, health and wealth system it may have. For example, if a country with an HDI of 1 suddenly suffered a sharp drop in its GDP and people started starving, the HDI would not reflect this, as life expectancy would gradually drop. Thus, the HDI is an indicator of how developed the society is in the long term.
Although the agencies that UNDP relies on for its information are quite reliable, they are not infallible . UNDP compares data from different institutions, offering a final combined data, which can be the combination of very precise data or, coincidentally, that could be wrong.
Another important area where the Human Development Index failed until recently was the issue of inequality. So that we understand, let's imagine a country in which half of the population has a life expectancy of 80 years, while the other half has a life expectancy of 20. Basically, half of the population lives four times longer than the other half, showing great inequality. However, taking the average life expectancy we would obtain that in that country we live, on average, about 50 years
Finally, one of the criticisms that has been made has been his conception of education . This index shows the idea that the more years the better education has been received. This idea turns out to be fallacious, given that you may have been in school for many years and have received a bad education or have studied for a few years and received good quality knowledge.
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