Human Development Index - A-Level Economics
Measures of Economic Development: Human Development Index (HDI)
Economic Development measures the quality of growth, rather than just an increase in incomes.
Indicators such as HDI combine the advantages of the GDP measure as well as the economic and social indicators that GDP misses.
HDI: Factors
The HDI measures three factors of human life:
Income (measured using GDP per capita at Purchasing Price Parity)
Health (measured using life expectancy)
Education (measured by average years spent in education + adult literacy rates) The HDI is presented as a number between 0 and 1:
Assessing the HDI
What are the advantages and limitations of HDI in making comparisons of living standards between countries?
Advantages
- HDI measures three factors, rather than just income, giving a more rounded view of living standards than GDP.
- Health, education and income are pivotal to good living standards
- The data used is easy-‐to-‐obtain and reliable
- The use of PPP qualifies income in terms of the cost of living
- Gives an idea about future living standards (i.e. education and life expectancy are indicators of the future situation)
- The HDI is given as one number between 0 and 1, which allows for easy comparison between different countries.
Disadvantages
- Living standards are based around normative economics, so HDI is ultimately undermined.
- HDI gives no indication equality. Income and access to educational and health services might be high amongst a small group of people but low amongst others.
- Purchasing Price Parity (PPP) values change very quickly and are likely to be inaccurate.
- Adult literacy places too much emphasis on reading and writing-‐ in this modern age computer literacy is arguably more important.
- Years of schooling is unreliable if students are repeating years due to lack of progress. Also, going to school is worthless is the education is of a poor quality.
- The calculation excludes outliers from the data, which is unfair because countries should be rewarded with higher HDIs for good performance in one particular field.
- HDI does not take into account social factors such as crime rates, quality of the environment, political freedom and war.
- The principle of diminishing marginal returns is used on the income component (e.g. the first £20,000 earned is seen as more important than the next £20,000 and so on), but it should be used on the education and health components as well because in the current measure each year of age or education is seen as equally important.
- The HDI could include so much more, such as access to internet and crime rates etc.
What other measures of development exist?
The percentage of adult male labour in agriculture
Countries with a high % are less developed because farming jobs pay less. Furthermore, a high % makes it unlikely for there to be any other jobs available for the workforce, indicating a lack of tertiary services in the economy
Combined primary and secondary school enrolment figures
This shows the number of people in education and the inclusion of the secondary school data ensures that we can see how well students progresses (i.e. if they were able to continue education to an older age)
Access to clean water; energy consumption per capita
A higher energy consumption indicates more use of technology, which suggests better living standards. More access to clean water means better development, better health and better living standards.
Access to mobile phones per thousand of the population
Mobile phones do not require a constant supply of electricity, so are an indication that a country can develop despite problems in infrastructure. Also, the measure gives us an idea of the wealth of the people and of how updated technology is in the country.
The Human Development Index is a measure of a country’s development level that takes into account three key dimensions of human development: a long and healthy life, access to knowledge, and a decent standard of living. The HDI was created by the United Nations Development Programme (UNDP) in 1990.
The HDI is calculated using three indicators: life expectancy at birth, mean years of schooling, and gross national income (GNI) per capita. Each indicator is given equal weight and is normalized on a scale from 0 to 1, with 1 being the best possible score.
While the HDI is a useful measure of a country’s development level, it does have some limitations. For example, it does not take into account income inequality within a country, nor does it measure other important aspects of human development such as political freedom, environmental sustainability, or gender equality.
The HDI is often used in A-Level Economics to analyze and compare the economic development of different countries. It can be used to examine the relationship between economic growth and human development, and to evaluate the effectiveness of policies aimed at promoting human development.
GDP (Gross Domestic Product) is a measure of a country’s economic output, while the HDI is a measure of a country’s development level that takes into account factors beyond just economic output. While GDP is an important measure of a country’s economic health, it does not necessarily reflect the well-being of its citizens.
Governments can use the HDI to identify areas where their country is lagging behind in terms of human development, and to target policies and programs aimed at improving outcomes in those areas. For example, if a country has a low score on the education component of the HDI, the government may invest in education initiatives to improve outcomes.
Some criticisms of the HDI include that it does not take into account important aspects of human development such as political freedom or environmental sustainability, that it is too heavily focused on Western values and norms, and that it may not accurately capture the experiences of people in low-income countries.
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