Economic Development - Human Development Index (HDI), GCEO-IGCSE Notes

Economic Development - Human Development Index (HDI)

Introduction to the HDI

• The Human Development Index is published by the UNDP and focuses on longevity, basic education and minimal income. It tracks progress made by countries in improving these three outcomes.
• The inclusion of education and health indicators is a sign of successful government policies in providing access to important merit goods such as health care, sanitation and education.
• Knowledge: First an educational component made up of two statistics – mean years of schooling and expected years of schooling
• Long and healthy life: Second a life expectancy component is calculated using a minimum value for life expectancy of 25 years and maximum value of 85 years.
• A decent standard of living: The final element is gross national income (GNI) per capita adjusted to purchasing power parity standard (PPP).

The UNDP classifies each country into one of three development bins:

• Low human development for HDI scores between 0.0 and 0.5,
• Medium human development for HDI scores between 0.5 and 0.8
• High human development for HDI scores between 0.8 and 1.0.

Important note:
GNI is now used rather than GDP because of the growing size of remittances in the global economy and also the importance of international aid payments. For example, because of remittances from abroad, GNI in the Philippines greatly exceeds GDP
Log of income is used in the HDI calculation because income is instrumental to human development but higher incomes are assumed to have a declining contribution to human development

 Global Human Development Map for 2011

GNI per Capita - Purchasing Power Parity (PPP)

This is a method of currency valuation based on the idea that two identical goods in different countries should eventually cost the same. This is illustrated by the Big Mac index, which takes a Big Mac hamburger and compares its prices in different countries in order to establish the relative value of their currencies. If PPP holds true, then you can buy the same goods and services with £100 in London as you can in Glasgow, New York and Cape Town. There are many reasons why this will not be the case!

Human Development Index for 2010

A selection of data drawn from the Human Development Index is provided in the table below.

Country	GNI per capita (2008 US$PPP)	HDI value	Inequality-adjusted HDI value (IHDI)	Life expectancy at birth (years)	Mean years of schooling (of adults) (years)
Norway	58,809	0.938	0.876	81.0	12.6
Australia	38,691	0.937	0.864	81.9	12.0
United States	47,093	0.902	0.799	79.6	12.4
Ireland	33,077	0.895	0.813	80.3	11.6
Canada	38,668	0.888	0.812	81.0	11.5
Sweden	36,936	0.885	0.824	81.3	11.6
Germany	35,308	0.885	0.814	80.2	12.2
Japan	34,692	0.884	Not available	83.2	11.5
Korea (Republic of)	29,517	0.877	0.731	79.8	11.6
France	34,340	0.872	0.792	81.6	10.4
Spain	29,661	0.863	0.779	81.3	10.4
Greece	27,580	0.855	0.768	79.7	10.5
Italy	29,619	0.854	0.752	81.4	9.7
United Kingdom	35,087	0.849	0.766	79.8	9.5
Hungary	17,472	0.805	0.736	73.9	11.7
Poland	17,803	0.795	0.709	76.0	10.0
Chile	13,561	0.783	0.634	78.8	9.7
Mexico	13,971	0.750	0.593	76.7	8.7
Russian Federation	15,258	0.719	0.636	67.2	8.8
Brazil	10,607	0.699	0.509	72.9	7.2
China	7,258	0.663	0.511	73.5	7.5
Sri Lanka	4,886	0.658	0.546	74.4	8.2
Thailand	8,000	0.654	0.516	69.3	6.6
South Africa	9,812	0.597	0.411	52.0	8.2
India	3,337	0.519	0.365	64.4	4.4
Kenya	1,627	0.470	0.320	55.6	7.0
Bangladesh	1,587	0.469	0.331	66.9	4.8
Nigeria	2,156	0.423	0.246	48.4	5.0
Côte d'Ivoire	1,624	0.397	0.254	58.4	3.3
Ethiopia	992	0.328	0.216	56.1	1.5
Sierra Leone	808	0.317	0.193	48.2	2.9
Niger	675	0.261	0.173	52.5	1.4
Zimbabwe	176	0.140	0.098	47.0	7.2

Note: IHDI: Inequality-adjusted HDI (a new measure introduced into 2010 Human Development Report)

Uneven progress but deep inequalities

• The world average HDI rose to 0.68 in 2010 from 0.57 in 1990, continuing the upward trend from 1970, when it stood at 0.48
• The fastest progress has been in East Asia & the Pacific, followed by South Asia and Arab States.
• All but 3 of the 135 countries have a higher level of human development today than in 1970
• The exceptions are the Democratic Republic of the Congo, Zambia and Zimbabwe
• From 1970 to 2010 real per capita income in developed countries increased 2.3 percent a year on average, compared with 1.5 percent for developing countries
• The real average income of people in 13 countries in the bottom quarter of today’s world income distribution is lower than in 1970

Limitations of the Human Development Index

The HDI notably fails to take account of qualitative factors, such as cultural identity and political freedoms (human security, gender opportunities and human rights for example).

Many argue that the HDI should become more human-centred and expanded to include more dimensions, ranging from gender equity to environmental biodiversity

The GNP per capita figure – and consequently the HDI figure – takes no account of income distribution. If income is unevenly distributed, then GNP per capita will be an inaccurate measure of the monetary well-being of the people. Inequitable development is not human development.

PPP values change very quickly and are likely to be inaccurate or misleading

The 2010 edition of the Human Development Report marked the launch of a new Inequality-adjusted HDIand also a Gender Inequality Index and a Multidimensional Poverty Index

Inequality HDI - The average loss in the HDI due to inequality is about 23 percent—that is, adjusted for inequality, the global HDI of 0.682 in 2011 would fall to 0.525.

Key point: the HDI is intended to allow economists to draw broad conclusions about which countries enjoyrelatively high standards of living, and which are, by comparison, under-developed.

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