Meaning and Measurement of Development

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MEASURING ECONOMIC DEVELOPMENT

PRIMER ON THE HUMAN DEVELOPMENT INDEX

What It Measures

The HDI is a composite of three basic components of human development: longevity, knowledge and standard of living. Longevity is measured by life expectancy. Knowledge is measured by a combination of adult literacy (two-thirds weight) and mean years of schooling (one-third weight). Standard of living is measured by purchasing power, based on real GDP per capita adjusted for the local cost of living (purchasing power parity, or PPP).

How to Combine Indicators

The breakthrough for HDI was to find a "measuring rod" for socio-economic achievement recorded in different units.
The HDI sets aminimum and a maximum for each dimension and then shows where each country (or region) stands in relation to these scales - expressed a a value between 0 and 1. The scores for the three dimensions are the averaged in an overall index.

Overall averages conceal much. The best solution would be to create separate HDIs for the most significant groups: by genger, for example, or by income group, geographial region, race or ethnic group. Separate HDIs would reveal a more detailed profile of human deprivation in each country (or region).

The HDI enables people and their governments to evaluate progress over time - and to determine priorities for policy intervantion. It also permints instructive comparisons of experiences in different countries (or regions).

(Adapted from Human Development Report, 1994 p.91)
Fixed Maximums and Minimums for HDI Values

Maximum Minimum

Life Expectancy (years) 25 85
Adult Literacy (%) 0 100
Mean Years of Schooling 0 15
Income (real GDP per
capita in PPP$) 200 40,000

Note on Calculating the Human Development Index:
The UNDP Approach - for NIGERIA 1993

The HDI is a composite of three basic components of human development: longevity, knowledge and standard of living. Longevity is measured by life expectancy. knowledge is measured by a combination of adult literacy (two-thirds weight) and mean years of schooling (one-third weight). Standard of Living is measured by purchasing power, based on real GDP per capita adjusted for the local cost of living (purchasing power parity, or PPP). ...

The HDI sets a minimum and a maximum for each dimension and then shows where each country stands ir relation to these values - expressed as a value between 0 and 1. So, since the minimum adult literacy is 0% and the maximum is 100%, the literacy component of knowledge for a country where the literacy rate is 75% would be 0.75. Similarly the minimum for life expectancy is 25 years and the maximum 85 years, so the longevity component for a country where life expectancy is 25 years would be 0.5. For income the minimum is $200 (PPP) and the maximum is $40,000 (PPP). Income above the average world income is adjusted using a progressively higher discount rate. The scores for thew three dimensions are then averaged in an overall index. ...

The HDI offers an alternative to GNP for measuring the relative socio-economic progress of nations. It enables people and their governments to evaluate progress over time - and to determine priorities for policy intervention. It also permits instructive comparisons of the experiences in different countries.

Calculating Nigeria’s HDI

Basic Data
Life expectancy at birth (1993) 50.6 years
Adult literacy rate (1993)54.1
Combined primary, secondary and tertiary enrolment ratio 52 Real GDP per capita (PPP$) (1993) 1540

Index Calculation
Life expectancy index50.6 - 25.0 = 25.6 = 0.426
85.5 - 25.5 60.0

Educational attainment index
(a) Adult literacy index54.1 - 0.0 = 54.1 = 0.541
100.0 - 0.0 100.0
(b) Combined primary, secondary
and tertiary enrolment index...
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