Introduction to Indices of Human Development

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Published on March 27, 2008

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Introduction to Indices of Human Development::  Introduction to Indices of Human Development: USAID Reform Project Dr. Brijesh C. Purohit November 2005 Slide2:  Quality of Life Human Development Index (HDI), Gender Disparity Index (GDI), and Economics of Happiness Slide3:  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. Measuring quality of life :  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 Slide5:  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 with putting a monetary value on life, as required in other areas of economics; saying that a treatment costs $5000 per QALY (i.e. per year of life) does not say or assume anything about the monetary value of a year of life. Slide6:  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. Slide7:  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. THE WORLD IN 2OO5 The Economist Intelligence Unit’s quality-of-life index :  THE WORLD IN 2OO5 The Economist Intelligence Unit’s quality-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. Life-satisfaction surveys :  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?” Slide10:  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. Slide11:  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). Determinants of quality of life :  Determinants of quality of life The Economist Intelligence Unit’s 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 Determinants of quality of life:  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 Slide14:  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 Slide15:  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 Luxemborg 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 Slide16:  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 3,290 96 23 Paraguay 5.756 74 3,600 95 21 Jordan 5.675 75 4,510 83 8 Nicaragua 5.663 76 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 3,930 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 Slide17:  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. Slide18:  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. Slide19:  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). Slide20:  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. Slide21:  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. Slide22:  Method used to calculate the Human Development Index 2005 report Top thirty countries Bottom ten countries Top/bottom three countries by continent Slide24:  CALCULATING THE HUMAN DEVELOPMENT INDICES Slide35:  Number in parentheses indicates change in rank since last report. Top thirty countries Slide36:  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) Bottom ten countries Slide37:  Africa  51.Seychelles (↓ 16)  58.Libya (=) 65. Mauritius (↓ 1) 175. Burkina Faso (=)  176.Sierra Leone (↑ 1) 177. Niger (↓ 1) Top/bottom three countries by continent Top/bottom three countries by continent :  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) Top/bottom three countries by continent :  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) Top/bottom three countries by continent :  Top/bottom three countries by continent Europe 1.  Norway (=) 2.  Iceland (↑ 5) 4.  Luxembourg (↑ 11) ... 100.  Georgia (↓ 3) 101.  Azerbaijan (↓ 10) 115.  Moldova (↓ 2) Top/bottom three countries by continent :  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 (=) Top/bottom three countries by continent :  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) Top/bottom three countries by continent :  Top/bottom three countries by continent South America 34.  Argentina (=) 37.  Chile (↑ 6) 46.  Uruguay (=) ... 88.  Paraguay (↑ 1) 107.  Guyana (↓ 3) 113.  Bolivia (↑ 1) Past top countries :  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 Slide45:  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 Slide46:  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 Slide47:  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 Slide48:    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.     Slide49:  States Grouped According to Selected Indicators Human Development Index(HDI) Infrastructure Index (II) Slide54:  (Jharkhand) Slide56:  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 Slide57:  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 Genuine Progress Indicator :  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. Activists :  Activists Scandinavia Netherlands France Germany Applying the Genuine Progress Indicator to legislative decisions :  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 Slide61:  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. A strategy that uses GPI to better reflect our concerns is essential to protecting our health and overall well being. Slide62:  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. Gross national happiness :  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. One of many alternative indicators:  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. Happiness as an Objective :  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. The Determinants of Gross National Happiness :  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. Conceptual building blocks of GNH arranged in three levels:  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. The aim not economic efficiency, but maximization of happiness :  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. Slide70:  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 – Slide71:  The human orientation of development has resulted in Bhutan’s commitment to the rapid enhancement of the population’s health and education Bhutan’s 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. Slide72:  Bhutan’s 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 Government’s 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. Slide73:  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 Bhutan’s territory. Elsewhere, Bhutan never exploited its natural resources on grounds of commercial profitability. Self-reliance and Paternalism Bhutan’s traditional socio-economic system based on the principle of communal self-reliance. The population lived in scattered villages, hamlets and isolated farms urban settlements were non-existent. Slide74:  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. Slide75:  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. Slide76:  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.

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