Development Index: In-Class WorksheetECNS 317

INSTRUCTOR

1 Calculating the Human Development Index (HDI)

The HDI was developed by the UN Development Programme in order to emphasize that people and theircapabilities should be the ultimate criteria for assessing the development of a country, not economic growthalone. It is the geometric mean of 3 other indexes:

1. I(GNIi) – Living Standards (GNI)a

2. I(LEi) – Health (Life expectancy)

3. I(Ei) – Education – the geometric meanof:

(a) I(EY SCi) – Expected years ofschoolingb

(b) I(MY SCi) – Mean years of schooling

aGross National Income (GNIi) is PPP-adjusted.bNumber of years of schooling that a child of

school entrance age can expect to receive if prevail-ing patterns of age-specific enrollment rates persistthroughout life disaggregated by sex.

How to Calculate These Indexes:

Each index, I(xi), is constructed forcountry i:

I(xi) =ln(xi)− ln(xmin)

ln(xmax)− ln(xmin)

xi −measure from country i

xmin −min. measure observed int’ly

xmax −max. measure observed int’ly

How To Calculate the HDI – An index of indexes using geometric means.

Education Index:

I(Ei) =√I(EY SCi)× I(MY SAi)

Human Development Index:

HDIi =3√I(GNIi)× I(LEi)× I(Ei)

Where

EY SCi : Expected Years of School Completion

MY SAi : Mean Years of School Attainment

GNIi : Natural log of Gross National Income

LEi : Life Expectancy

Economic Development, INSTRUCTOR

2 Let’s Practice!

Use the following minimum and maximum values observed internationally as well as the values for Nepaland the U.S. to calculate your indexes, I(xi).

Life Expected Years Mean Years GNI per CapitaExpectancy of Schooling of Schooling (PPP-adjusted)

Minimum 20 0 0 163

Maximum 83.2 20.6 13.2 108,211

Nepal 69.1 8.9 3.2 1,137

United States 78.7 16.8 13.3 43,480

Nepal

ranked 145th out of 186 for HDI in 2013

I(GNINepal) =

I(LENepal) =

I(ENepal) =

HDINepal =

United States

ranked 5th out of 186 for HDI in 2013

I(GNIU.S.) =

I(LEU.S.) =

I(EU.S.) =

HDIU.S. =

Economic Development, INSTRUCTOR