Troubling Tradeoffs in the Human Development Index

Troubling Tradeoffs in the Human Development Index

The 20th Human Development Report has introduced a new version of its famous Human Development Index (HDI). The HDI aggregates country-level attainments in life expectancy, schooling and income per capita. Each year's rankings by the HDI are k...

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Bibliographic Details
Main Author: Ravallion, Martin
Format: Policy Research Working Paper
Language:English
Published: 2012
Subjects:
ABSOLUTE VALUE
AVERAGE INCOME
AVERAGE INCOMES
CONTINGENT VALUATION
COUNTRY PERFORMANCE
CROSS-COUNTRY DIFFERENCES
DERIVATIVE
DEVALUATION
DEVALUATIONS
DEVELOPING COUNTRIES
DEVELOPMENT ECONOMICS
DEVELOPMENT POLICY
ECONOMIC GROWTH
ECONOMIC MODELS
ECONOMIC REVIEW
ECONOMIC THEORY
ELASTICITY
EMPIRICAL RESULTS
ENROLMENT RATES
EXPECTED UTILITY
FUNCTIONAL FORM
GDP
GROWTH THEORY
HOLDING
HUMAN DEVELOPMENT
HUMAN DEVELOPMENT INDEX
INCOME
INCOME EFFECT
INCOME ELASTICITY
INCREASING FUNCTION
INEQUALITY
INFLATION
INNOVATION
INTERNATIONAL BANK
INTRINSIC VALUE
INVESTING
LABOR MARKET
LIFE EXPECTANCY
LIVING STANDARDS
LOG INCOME
LOW INCOMES
MARGINAL COST
MARGINAL COSTS
MARGINAL UTILITY
MARGINAL VALUE
MARKET RETURNS
MEAN INCOME
NATIONAL INCOME
POLICY MAKING
POLICY RESEARCH
POOR COUNTRIES
POOR COUNTRY
POOR PERSON
POVERTY MEASURE
POWER PARITY
PRICE LEVELS
PURCHASING POWER
QUALITY OF LIFE
RELATIVE PRICES
RETURN
RETURNS
SCHOOLING
TRADEOFFS
TRANSPARENCY
VALUATION
VALUATIONS
VALUE JUDGMENTS
WAGES
WEALTH
Online Access:http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101129085041
http://hdl.handle.net/10986/3967
Description
Summary:The 20th Human Development Report has introduced a new version of its famous Human Development Index (HDI). The HDI aggregates country-level attainments in life expectancy, schooling and income per capita. Each year's rankings by the HDI are keenly watched in both rich and poor countries. The main change in the 2010 HDI is that it relaxes its past assumption of perfect substitutability between its three components. However, most users will probably not realize that the new HDI has also greatly reduced its implicit weight on longevity in poor countries, relative to rich ones. A poor country experiencing falling life expectancy due to (say) a collapse in its health-care system could still see its HDI improve with even a small rate of economic growth. By contrast, the new HDI's valuations of the gains from extra schooling seem unreasonably high -- many times greater than the economic returns to schooling. These troubling tradeoffs could have been largely avoided using a different aggregation function for the HDI, while still allowing imperfect substitution. While some difficult value judgments are faced in constructing and assessing the HDI, making its assumed tradeoffs more explicit would be a welcome step.

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