How An Economy Develops Socially - Human Development Index (HDI)
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How a given economy can be studied in many ways. It is mainly determined whether the economy is growing economically by means of GDP, also the unemployment rate is important. To determine whether a given economy is also developing socially, the HDI index was created.
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Definition
Human Development Index is a synthetic measure describing changes in the socio-economic development of individual countries. It is also referred to as the Socio-Economic Development Index.
The HDI index, in a much broader scope than the GDP per capita index, measures the real standard of living of people in the world. A more complete assessment of development is particularly possible when, together with the HDI, other indicators recommended by UNDP are analyzed, for example, concerning individual areas (fields) of economic, social and demographic development, or data showing environmental pollution, the level of personal security (UNDP Report 2015, p. 1). However, despite its great popularity, it is considered less reliable than the Human Poverty Index
What are the consequences and implications?
The HDI is used to attract the attention of policy makers, the media and NGOs, and to shift the focus from mere economic statistics to human performance. It was created to re-emphasize that people and their capabilities should be the final criterion for assessing a country's development, not economic growth.
The HDI is also used to challenge national policy choices and determine how two countries with the same level of per capita income can have very different human development outcomes. For example, two countries may have similar per capita incomes but drastically different life expectancy and literacy levels, so that one country has a much higher HDI than the other. These contrasts stimulate debate on government health and education policies to determine why what can be achieved in one country is beyond the reach of another.
The HDI is also used to highlight differences within countries, between provinces or states, and between genders, ethnic groups, and other socioeconomic groups. Highlighting internal disparities in this direction sparked a national debate in many countries.
History
This system was introduced by the United Nations to enable international comparisons. The index was developed in 1990 by Pakistani economist Mahbub ul Haq. Thanks to the development of this indicator, non-economic data, which were previously placed in the background when assessing the development of given countries, gained a much greater role. Since 1993, it has been used in its annual reports by the United Nations Development Program (UNDP).
Calculation
To calculate the synthetic measure of HDI, measures covering three spheres of life (health, education and income of the population) are used. The following indicators are used to measure the HDI: average life length, overall gross enrollment rate for all levels of education, the literacy rate, i.e. the illiteracy rate and GDP per capita in USD calculated according to the purchasing parity of the currency (PPP $).
The health dimension is assessed by life expectancy at birth, the education dimension is measured by mean of years of schooling for adults aged 25 years and more and expected years of schooling for children of school entering age. The standard of living dimension is measured by gross national income per capita. The HDI uses the logarithm of income, to reflect the diminishing importance of income with increasing GNI. The scores for the three HDI dimension indices are then aggregated into a composite index using geometric mean. Refer to Technical notes for more details.
HDI scale
The value of the HDI index ranges from 0 to 1. The results obtained thanks to the application of the Human Development Index allow to group countries into three basic groups:
- highly developed countries 0.8 - 1.0
- medium developed countries 0.5 - 0.8
- poorly developed countries 0.2-0.5
HDI limitations
When calculating the Human Development Index, there are many limitations and problems that may interfere with the actual level of the index. Such limitations include: problems with scaling and weighting of indicators included in the HDI, lack of objective and accurately determined weights, barriers to obtaining authentic data, huge amount of data to verify.
The HDI simplifies and captures only part of what human development entails. It does not reflect on inequalities, poverty, human security, empowerment, etc. The HDRO provides other composite indices as broader proxy on some of the key issues of human development, inequality, gender disparity and poverty.
Source: Dzieciuchowicz J. (2011). Rozwój spoÅ‚eczny wspóÅ‚czesnego Å›wiata - struktura i typologia przestrzenna, "Human Development Report", United Nations Development Programme
