Composite indices — HDI and beyond

Pushing the frontiers of measurement has always been a cornerstone of the human development approach. But it has never been measurement for the sake of measurement. The HDI has enabled innovative thinking about progress by capturing the simple yet powerful idea that development is about much more than income. Over the years the Human Development Report has introduced new measures to evaluate progress in reducing poverty and empowering women.

  • The Human Development Index (HDI) measures the average achievements in a country in three basic dimensions of human development: a long and healthy life, access to knowledge and a decent standard of living. Data availability determines HDI country coverage. To enable cross-country comparisons, the HDI is, to the extent possible, calculated based on data from leading international data agencies and other credible data sources available at the time of writing.
  • The Inequality-adjusted Human Development Index (IHDI) adjusts the Human Development Index (HDI) for inequality in distribution of each dimension across the population. The IHDI accounts for inequalities in HDI dimensions by “discounting” each dimension’s average value according to its level of inequality. The IHDI equals the HDI when there is no inequality across people but is less than the HDI as inequality rises. In this sense, the IHDI is the actual level of human development (accounting for this inequality), while the HDI can be viewed as an index of “potential” human development (or the maximum level of HDI) that could be achieved if there was no inequality. The “loss” in potential human development due to inequality is given by the difference between the HDI and the IHDI and can be expressed as a percentage.
  • The Gender Inequality Index (GII) reflects women’s disadvantage in three dimensions—reproductive health, empowerment and the labour market—for as many countries as data of reasonable quality allow. The index shows the loss in human development due to inequality between female and male achievements in these dimensions. It ranges from 0, which indicates that women and men fare equally, to 1, which indicates that women fare as poorly as possible in all measured dimensions.
  • The Multidimensional Poverty Index (MPI) identifies multiple deprivations at the individual level in health, education and standard of living. It uses micro data from household surveys, and—unlike the Inequality-adjusted Human Development Index—all the indicators needed to construct the measure must come from the same survey. Each person in a given household is classified as poor or nonpoor depending on the number of deprivations his or her household experiences.

Background

The Human Development Report presents analytical tools for policy choice. These tools are amongst the most significant contributions of the Report. They provide user friendly methods for the analysis of human development at the international, regional, national and sub-national levels and the means for assessing trends and gaps in human development.

For policy makers and development practitioners, the analytical tools introduced in the Reports have the advantage of being simple, requiring only basic statistical data and mathematical knowledge. They are readily understandable by non-specialists and facilitate stark findings that attract support for human development and help decision-makers determine priorities and formulate human development-related policies.

In the Reports these tools are generally applied at the international level. Subject to the availability of data, they are also applicable at the national and sub-national levels. The latter include: regional, urban/rural, male/female, age-group, income level, ethnic group, etc. This note briefly presents the analytical tools developed in the Human Development Reports and describes their potential uses in national settings.

Human Development: The Concept

The concept of human development focuses on the ends rather than the means of development and progress. The real objective of development should be to create an enabling environment for people to enjoy long, healthy and creative lives. Though this may appear to be a simple truth, it is often overlooked as more immediate concerns are given precedence.

Human development denotes both the process of widening people's choices and improving their well-being. The most critical dimensions of human development are: a long and healthy life, knowledge and a decent standard of living. Additional concerns include social and political freedoms. The concept distinguishes between two sides of human development. One is the formation of human capabilities, such as improved health or knowledge. The other is the enjoyment of these acquired capabilities, for work or for leisure.

Human development is often being misconstrued and confused with the following concepts and approaches to development.

  • Economic growth is a means and not an end of development. Moreover, high GDP growth does not necessarily translate to progress in human development. Global experience has shown that income and human development are not always perfect companions, where some countries display relatively high levels of human development for their income and vice versa.
  • Theories of human capital formation and human resource development view human beings as means to increased income and wealth rather than as ends. These theories are concerned with human beings as inputs to increasing production;
  • The human welfare approach looks at human beings as beneficiaries rather than participants in the development process;
  • The basic needs approach concentrates on the bundle of goods and services that deprived population groups need - food, shelter, clothing, health care and water. It focuses on the provision of these goods and services rather than their implications on human choices.

Thus the concept of human development is a holistic one putting people at the centre of all aspects of the development process.