HDI and its Measurement

What is HDI (Human Development Index)?

The Human Development Index (HDI) is a widely used global measure of human development and well-being. It is a composite index that considers various aspects of a country’s economic, social, and health status. The United Nations Development Programme (UNDP) introduced the HDI in 1990 as a more comprehensive measure of development than traditional measures such as GDP per capita. In this blog post, we will delve deeper into the HDI, looking at its components and significance, as well as its limitations and criticisms.

In 1990, while working as a Program Director at the United Nations Development Programme (UNDP), Pakistani economist Mahbub ul Haq and his team developed the Human Development Index (HDI) (Source). The HDI is a composite index that considers three aspects of human development: health, education, and standard of living. Each dimension is measured by a number of indicators, which are then added together to form a single score. Life expectancy at birth, which reflects a country’s overall health status, is used to calculate the health dimension.

Two indicators measure the education dimension: mean years of schooling (the average number of years of education received by adults) and expected years of schooling (the number of years of education that a child can expect to receive). Finally, Gross National Income (GNI) per capita, which reflects a country’s economic prosperity, is used to calculate the standard of living.

Components of the Human Development Index (HDI)

Calculating the Human Development Index (HDI) may appear to be a difficult task, but it is actually quite simple once you understand the components and methodology. The HDI is a composite index that assesses a country’s overall level of human development across three dimensions: health, education, and living standards.

Life expectancy at birth is used to calculate the first dimension, health. This indicator reflects a country’s overall health status and is calculated by estimating the number of years a newborn baby will live based on current mortality rates.

The second dimension, education, is measured by two indicators: mean years of schooling and expected years of schooling. The average number of years of education received by adults aged 25 and older is reflected in the mean years of schooling. The number of years of schooling that a child of school entrance age can expect to receive if current patterns of age-specific enrollment rates remain constant throughout the child’s life is reflected in expected years of schooling.

Gross National Income (GNI) per capita is used to calculate the third dimension, the standard of living. This indicator measures a country’s economic prosperity and is calculated by dividing its total income by population. The GNP per capita is adjusted for purchasing power parity (PPP) to account for differences in the cost of living between countries.

Calculation of the Human Development Index (HDI)

The HDI is calculated as the geometric mean of these three indices, which means that each index is raised to the power of 1/3 and then multiplied together. This ensures that each dimension is given equal weight in the overall HDI score.

Each dimension is first standardized using a minimum and maximum value before being used to calculate the HDI. For health, the minimum value is 20 years, and the maximum is 85 years. The minimum value for education is zero years, and the maximum value is fifteen years. After the three dimensions have been standardized, they are combined using a geometric mean, which gives equal weight to each dimension.

The formula for the Human Development Index (HDI) is as follows:

HDI = (1/3) x [(Health Index)^(1/3) + (Education Index)^(1/3) + (Income Index)^(1/3)]

Where:

• Health Index = (Life Expectancy – 20) / (85 – 20)
• Education Index = (2/3) x [(Mean Years of Schooling / 15)^(1/2)] + (1/3) x [(Expected Years of Schooling / 18)^(1/2)]
• Income Index = ln(GNI per capita PPP / $100) / ln($75,000 / $100)

In this formula, the Health Index measures a country’s life expectancy at birth; the Education Index measures a country’s mean years of schooling and expected years of schooling. The Income Index measures a country’s Gross National Income (GNI) per capita adjusted for purchasing power parity (PPP).

The resulting HDI score is between 0 and 1, with 1 being the highest possible score. Based on their HDI score, countries are divided into four categories: very high human development, high human development, medium human development, and low human development.

According to the most recent HDI report (2022), the top ten countries with the highest Human Development Index (HDI) are as follows:

1. Switzerland — 0.962
2. Norway — 0.961
3. Iceland — 0.959
4. Hong Kong (China) — 0.952
5. Australia — 0.951
6. Denmark — 0.948
7. Sweden — 0.947
8. Ireland — 0.945
9. Germany — 0.942
10. Netherlands — 0.941

According to the most recent HDI report (2022), the top ten countries with the lowest Human Development Index (HDI) are as follows:

1. South Sudan — 0.385
2. Chad — 0.394
3. Niger — 0.400
4. Central African Republic — 0.404
5. Burundi — 0.426
6. Mali — 0.428
7. Mozambique — 0.446
8. Burkina Faso — 0.449
9. Yemen — 0.455
10. Guinea — 0.465

HDI of Nepal

Nepal’s ranking improved marginally from 144th to 143rd position, but its Human Development Index (HDI) value decreased from 0.604 to 0.602 due to the disruptive effects of the COVID-19 pandemic. In terms of gender equality, Nepal ranks 113th in the world according to the Global Gender Inequality Index (Source, Sept 12, 2022).

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Significance/ Importance of HDI (Human Development Index)

The Human Development Index (HDI) is a widely used and important indicator of a country’s overall level of human development. The HDI is more than just a number; it is a reflection of a country’s progress in areas such as health, education, and living standards. Here are some of the reasons why the HDI is important:

1. Provides a comprehensive measure of development: The HDI provides a comprehensive measure of development that extends beyond economic indicators such as GDP per capita. The HDI provides a more comprehensive picture of a country’s development by taking into account indicators such as life expectancy, education, and income.
2. Helps identify areas for improvement: By breaking down development into different dimensions, the HDI can assist a country in identifying areas where it may need to improve. If a country’s life expectancy is low, it may need to invest in healthcare infrastructure. If a country’s education level is low, it may need to focus on improving access to quality education.
3. Allows for international comparisons: Because the HDI is calculated for nearly every country on the planet, it allows for international comparisons. This allows countries to compare themselves to their peers and identify areas where they can learn from others.
4. Encourages policy changes: Governments may be encouraged to improve their country’s HDI ranking by implementing policies that focus on the HDI indicators. A government, for example, may invest in education in order to improve its country’s mean years of schooling indicator.
5. Helps track progress over time: Because the HDI is calculated annually, it is possible to track progress over time. This can assist governments, international organizations, and civil society in tracking progress toward development goals.

Criticisms or Limitations of HDI

While the HDI is a useful framework for understanding development, researchers, policymakers, and development practitioners have scrutinized and debated it. Here are some of the HDI’s main limitations and criticisms:

1. Narrow Focused: The HDI only measures three dimensions of human development – health, education, and income – which may not fully capture the complex nature of human well-being. The HDI, for example, does not take into account environmental sustainability, political freedom, or social equity, all of which are important aspects of development.
2. Inadequate quality indicators: The HDI relies on basic indicators such as life expectancy, mean years of schooling, and GDP per capita, which may not accurately reflect a country’s quality of life and well-being. For example, a country with a high life expectancy may have poor health outcomes in terms of morbidity rates or access to healthcare services.
3. Limitations of Data: The HDI relies on data from national surveys and administrative sources, which may contain inaccuracies and biases. This can lead to measurement errors and make HDI scores difficult to compare across countries and over time.
4. Inadequate coverage: The HDI only includes a small number of countries, excluding many low-income and small island states, which may face unique development challenges and experiences.
5. Issues with weighting: The HDI assigns equal weight to each dimension, which may not reflect the relative importance of each dimension to human well-being. Some argue, for example, that education and income have a greater impact on human development than health.
6. A Static measure: The HDI is a static measure that does not account for changes in human development over time. This can be problematic for countries undergoing rapid development or crises such as wars, pandemics, or natural disasters.