MOH NUR ZAIM

HUMAN DEVELOPMENT INDEX (HDI)

INTRODUCTION
The Human Development Index (HDI) is a summary index that measures country` s average achievements in three basic aspects of human development: longevity, knowledge, and a decent standard of living. The index was developed in 1990 by Pakistani economist Mahbub ul Haq and Sir Richard Jolly, with help from Gustav Ranis of Yale University and Lord Meghnad Desai of the London School of Economics. It has been used since then by the United Nations Development Programme in its annual Human Development Report.
Based on available statistics UNDP was able to provide an HDI for 175 countries in the latest Human Development Report. The HDI is today widely used in academia, the media and in policy circles to measure and compare progress in human development between countries and over time.
The HDI combines three basic dimensions: first, Life expectancy at birth, as an index of population health and longevity. Second, Knowledge and education, as measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting).Third, The standard of living, as measured by the natural logarithm of gross domestic product (GDP) per capita at purchasing power parity (PPP) in USD.
Actually the HDI has been organized in order to highlight the presence of human poverty in both the rich and poor countries. High income per person is no guarantee of a poverty-free country. Even among the richest countries, there is human poverty. It also used to focus attention on the most deprived people and deprivations in basic human capabilities in a country, not on average national achievement. The human poverty indices focus directly on the number of people living in deprivation - presenting a very different picture from average national achievement. It also moves the focus of poverty debates away from concern about income poverty alone. Besides that, the HDI is important to guide national planning for poverty alleviation. Many National Human Development Reports now break down the HPI by region or other socioeconomic groups to identify the areas or social groups within the country most deprived in terms of human poverty. The results can be dramatic, creating national debate and helping to reshape policies.

METHODOLOGY


HDI trends between 1975 and 2004

OECD
Central and eastern Europe, and the CIS
Latin America and the Caribbean
East Asia
Arab States
South Asia
Sub-Saharan Africa





In general to transform a raw variable, say x, into a unit-free index between 0 and 1 (which allows different indices to be added together), the following formula is used:

• Life Expectancy Index, L = LE – min (x)
max (x) - min (x)

• Education Index, E = 2 x ALR + 1 x ER
3 3

• GDP Index, G = log (GDP pc) – log (100)
log (40000) – log (100)

• Total human development index, HDI = L + E + G
3
Examples
Calculation examples of the indices.
Index Measure Minimum value Maximum value Formula
Longevity Life expectancy at birth (LE) 25 yrs
85 yrs


Education Literacy rate (LR) 0% 100%

Combined gross enrollment ratio (CGER) 0% 100%
GDP GDP per capita (PPP)
100 USD
40,000 USD


HDI Total human development index not applicable not applicable







Table 1: Cambodia’s human development index 2005
HDI value Life expectancy at birth
(years) Adult literacy rate
(% ages 15 and older) Combined primary, secondary and tertiary gross enrolment ratio
(%) GDP per capita
(PPP US$)
1. Iceland (0.968) 1. Japan (82.3) 1. Georgia (100.0) 1. Australia (113.0) 1. Luxembourg (60,228)
129. Solomon Islands (0.602) 138. Gambia (58.8) 97. Vanuatu (74.0) 129. Kenya (60.6) 122. Viet Nam (3,071)
130. Lao People's Democratic Republic (0.601) 139. Madagascar (58.4) 98. Kenya (73.6) 130. Zambia (60.5) 123. Bolivia (2,819)
131. Cambodia (0.598) 140. Cambodia (58.0) 99. Cambodia (73.6) 131. Cambodia (60.0) 124. Cambodia (2,727)
132. Myanmar (0.583) 141. Togo (57.8) 100. Egypt (71.4) 132. United Arab Emirates (59.9) 125. Papua New Guinea (2,563)
133. Bhutan (0.579) 142. Sudan (57.4) 101. Madagascar (70.7) 133. Swaziland (59.8) 126. Ghana (2,480)
177. Sierra Leone (0.336) 177. Zambia (40.5) 139. Burkina Faso (23.6) 172. Niger (22.7) 174. Malawi (667)

Figure 1:
The human development index gives a more complete picture than income











This year’s HDI, which refers to 2005, highlights the very large gaps in well-being and life chances that continue to divide our increasingly interconnected world. By looking at some of the most fundamental aspects of people’s lives and opportunities it provides a much more complete picture of a country's development than other indicators, such as GDP per capita. Figure 2 illustrates that countries on the same level of HDI as Cambodia can have very different levels of income.
Of the components of the HDI, only income and gross enrolment are somewhat responsive to short term policy changes. For that reason, it is important to examine changes in the human development index over time.
The human development index trends tell an important story in that aspect. Since the mid-1970s almost all regions have been progressively increasing their HDI score (Figure 2). East Asia and South Asia have accelerated progress since 1990. Central and Eastern Europe and the Commonwealth of Independent States (CIS), following a catastrophic decline in the first half of the 1990s, has also recovered to the level before the reversal. The major exception is sub-Saharan Africa. Since 1990 it has stagnated, partly because of economic reversal but principally because of the catastrophic effect of HIV/AIDS on life expectancy.
Figure 2: HDI Trends

















World map indicating Human Development Index (2007)


High
██ 0.950 and over
██ 0.900–0.949
██ 0.850–0.899
██ 0.800–0.849

Medium
██ 0.750–0.799
██ 0.700–0.749
██ 0.650–0.699
██ 0.600–0.649
██ 0.550–0.599
██ 0.500–0.549
Low
██ 0.450–0.499
██ 0.400–0.449
██ 0.350–0.399
██ under 0.350
██ not available

A HDI below 0.5 is considered to represent "low development". All 22 countries in that category are located in Africa. The highest-scoring Sub-Saharan countries, Gabon and South Africa, are ranked 119th and 121st, respectively. Nine countries departed from this category this year and joined the "medium development" group.
A HDI of 0.8 or more is considered to represent "high development". This includes all developed countries, such as those in North America, Western Europe, Oceania, and Eastern Asia, as well as some developing countries in Eastern Europe, Central and South America, Southeast Asia, the Caribbean, and the oil-rich Arabian Peninsula. Seven countries were promoted to this category this year, leaving the "medium development" group: Albania, Belarus, Brazil, Libya, Republic of Macedonia, Russia and Saudi Arabia.



















High Income Countries
"High income countries" are defined by the World Bank as countries with a Gross National Income per capita of $11,116 or more. According to the United Nations definition some high income countries may also be developing countries. Thus, a high income country may be classified as either developed or developing.
When using GDP/cap as an indicator of "developed" status, one must take into account how some countries have achieved a (usually temporarily) high GDP/cap through natural resource exploitation (e.g., Nauru through phosphate extraction and Equatorial Guinea) without developing the diverse industrial and service-based economy necessary for "developed" status — similarly, the Bahamas, Barbados, Antigua and Barbuda, and Saint Kitts and Nevis depend overwhelmingly on the tourist industry.
Despite their high per capita GDP, the GCC countries in the Middle East are generally not considered developed countries because their economies depend overwhelmingly on oil production and export; in many cases (notably Saudi Arabia), per capita GDP is also skewed by an unequal distribution of wealth.


Developed Country
The term developed country, or advanced country, is used to categorize countries with developed economies in which the tertiary and quaternary sectors of industry dominate. Countries not fitting this definition may be referred to as developing countries.
This level of economic development usually translates into a high income per capita and a high Human Development Index (HDI). Countries with high gross domestic product (GDP) per capita often fit the above description of a developed economy. However, anomalies exist when determining "developed" status by the factor GDP per capita alone.


Developing Country
A developing country is a country which has an undeveloped or developing industrial base, and an inconsistent varying Human Development Index (HDI) score and per capita income, but is in a phase of economic development. Usually all countries which are neither a developed country nor a failed state are classified as developing countries, despite the above facts, this is not true for all countries as some developing countries are far more developed than some developed countries.
Countries with more advanced economies than other developing nations, but which have not yet fully demonstrated the signs of a developed country, are grouped under the term newly industrialized countries. Other developing countries which have maintained sustained economic growth over the years and exhibit good economic potential are termed as emerging markets. The Big Emerging Market (BEM) economies are Argentina, Brazil, China, Egypt, India, Indonesia, Mexico, Poland, Russia, South Africa, South Korea and Turkey. The application of the term developing country to any country which is not developed is inappropriate because a number of poor countries have experienced prolonged periods of economic decline. Such countries are classified as either least developed countries or failed states.
Development entails a modern infrastructure (both physical and institutional), and a move away from low value added sectors such as agriculture and natural resource extraction. Developed countries, in comparison, usually have economic systems based on continuous, self-sustaining economic growth in the tertiary and quaternary sectors and high standards of living.







High income Upper-middle income Lower-middle income Low income























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http://www.answers.com/topic/human-development-index