the human development indices
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THE HUMAN DEVELOPMENT INDICES. M.H. Suryanarayana IGIDR Mumbai. Human Development Index. Lecture Outline Why was the HDI created? What is the Human Development Index (HDI)? What does the HDI tell us: evidence from the Human Development Report 2005. - PowerPoint PPT PresentationTRANSCRIPT
THE HUMAN DEVELOPMENT THE HUMAN DEVELOPMENT INDICESINDICES
M.H. SuryanarayanaIGIDR
Mumbai
April 19, 2023 [email protected] 2
Human Development Index
Lecture Outline
Why was the HDI created?
What is the Human Development Index (HDI)?
What does the HDI tell us: evidence from the Human Development Report 2005.
Is the HDI measure a foolproof measure of human development?
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Human Development Index
Why was the HDI created?
Limitations of GNP: GNP may grow due to sale of knives and rifles ..does not allow health of children, quality of education, or the joys of their play…
For cross-country comparisons.. Assess progress in human development across countries. Assess individual development with reference to ‘well-being’
Though open to criticism, serves as a basic indicator and allows ranking of countries in terms of human development
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Human Development Index
Why was the HDI created?, Cont…
Certainly not easy to gather the relevant information for each United Nations country!!
Just think of the statistics and logistics that are required to generate HDI for 177 countries!!!
The HDI can signal where problems lie which are important for both country policy makers and international policy makers and agencies – this really indicates the importance of information in the modern day world and indeed the importance of information and how this is processed for resource allocation.
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Human Development Index
What is the Human Development Index (HDI)?
“The human development index (HDI) is a composite index that measures the average achievements in a country in three basic dimensions of human development: a long and healthy life, as measured by life expectancy at birth; knowledge, as measured by the adult literacy rate and the combined gross enrolment ratio for primary, secondary and tertiary schools; and a decent standard of living, as measured by GDP per capita in purchasing power parity (PPP) US dollars”
(United Nations(2005): Human Development Report 2005, p. 214)
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Human Development Index
What is the Human Development Index (HDI)? Cont…
• Dual dimension of HD:
1) Formation of human capabilities: improved health, knowledge and skills
2) Using the capabilities for productive work or leisure.
• HDI: concerned with the first only and measures average formation of human capabilities
•
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Human Development Index
What is the Human Development Index (HDI)? Cont…
• Composite index measuring key dimensions of human capabilities– HDI introduced in HDR of 1990, with an HDI for 1987,
and has since become universally known– UNDP’s annual HD report eagerly awaited globally
• Technically the HDI involves calculating a series of indices using primary data gathered from a number of different international agencies (e.g. UN, World Bank, ILO, IMF etc…).
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Human Development Index
What is the Human Development Index (HDI)? Cont…
Since the HDI was first published, it has gained wide recognition as a powerful tool for advocating for and monitoring human development.
The HDI is constantly being monitored and trends in HDI performance are re-calculated with better information in order to provide the best picture of human development over time.
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The Human Development Indices
• The HDI (Human Development Index) - a summary measure of human development
• The GDI (Gender-related Development Index) - the HDI adjusted for gender inequality
• The GEM (Gender Empowerment Measure) - Measures gender equality in economic and political participation and decision making
• The HPI (Human Poverty Index) - Captures the level of human poverty
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Human Development Index
• What is ‘Human Development’?
• - process of enlarging people’s choices
• But choices are infinite in number and change overtime; if so, how to measure HD?
• - Identify the most critical choices, measure achievements in enlarging these choices, and aggregate these achievements into an index, which can be used for inter-country comparisons.
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Human Development Index
• What are the most critical human choices?
• - Long and healthy life
• - Knowledge
• - Decent standard of living
• HDR 1990: Health, Education & Income – Most critical dimensions of Human Development
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Human Development Index
• How to measure the critical dimensions?– Issues related to data like measurement, collection and quality
should be minimum– Each indicator should be universally valued; conceptual problems
should be minimum in terms of relevance and sensitivity– Values of each indicator should be comparable across countries
• What could be such measures? Longevity: Life Expectancy at birth Knowledge: Adult Literacy rate & Gross Enrolment Ratio in
primary, secondary and tertiary levels Std. of Living: per capita GDP (PPP US$)
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Human Development Index
• Statistical indicators used in HDI are– life expectancy at birth– adult literacy and gross enrolment in primary,
secondary and tertiary levels– per capita GDP (PPP US$)
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Human Development Index
• Life expectancy at birth: # of years a new born infant would live subject to the prevailing patterns of age specific mortality rates
• Adult literacy rate: % of people ages 15 & above capable of reading and writing (with understanding) a simple statement.
• Gross enrolment ratio: # of students enrolled in a level of education (irrespective of age) as a % of the population of official school age for that level.
• GDP (PPP US $): GDP converted US dollars at a rate of exchange that takes into account price differences across countries.
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Human Development Index
• How to aggregate when the measures differ in units & hence are not comparable?
• - Normalization w.r.t bounds:
• Normalized Score = Actual Value – Minimum Value
• Range
• Where Range = (Maximum value – Minimum value)
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Goalposts for calculating the HDI
Indicator Minimum value Maximum value
Life expectancy 25 years 85 years
Adult literacy 0% 100%
Gross enrolment 0% 100%
GDP per capita 100 (PPP US$) 40,000 (PPP US$)
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Calculating the HDI
Dimensions:
Indicators:
Dimensionindex
A long and
healthy life
Life
Expectancy
Life
Expectancy
Index
Being
Knowledgeable
Literacy &
Enrolment
Education
Index
A decent
standard
of living
GDP
per capita
GDP
Index
The HDI
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HDI
PPP per capita income with declining weight for higher incomes
Life expectancy
Education
Primary, secondary and tertiary enrolment
Adult literacy
1/3 1/3 1/3
1/3 2/3
Calculating the HDI
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The weights in the HDI
• The three dimensions in the HDI – health, education, standard of living – weighted equally
• Equal weighting is not an accident; reflects a belief that all three are equally important
• Assumption of substitutability – central, but sometimes forgotten
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25 years
85 years
0
1
41.4
Life expectancy
index
0.27
100%
0%
78.1 0.68
Literacy (2/3)
Enrolment (1/3)
49
0% 0
100% 1
Education indexIncome index
40,000
100
0.34780
0
1
(log scale)
HDI
1
0
0.433
0.27 + 0.68 + 0.34 3
= 0.433
Calculating the HDI: an example (Zambia)
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25 years
85 years
0
1
44.5
Life expectancy
index
0.33
100%
0%
0.34
Literacy (2/3)
Enrolment (1/3)
44.9
0% 0
100% 1
Education indexIncome index
40,000
100
0.36822
0
1
(log scale)
HDIRank=173
1
0
0.346
0.33 + 0.34 + 0.36 3
= 0.346
Calculating the HDI: Afghanistan 2002
28.7
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25 years
85 years
0
1
43.1
Life expectancy
index
0.30
100%
0%
0.35
Literacy (2/3)
Enrolment (1/3)
59.3
0% 0
100% 1
Education indexIncome index
40,000
100
0.34964
0
1
(log scale)
HDIRank = 174
1
0
0.345
0.30 + 0.35 + 0.36 3
= 0.345
Calculating the HDI: Afghanistan 2005
23.5
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HDI Computation: Nepal 1996Life Expect. ALR # yrs school GDPPC (US $ PPP)
55.0 36.72 2.25 1186
Normalized ScoresLife expectancy= (55-25) / (85-25) = 0.50
Adult literacy rate: (36.72 – 0) / (100 – 0) = 0.367
# yrs. of schooling: = (2.25 - 0) / (15 - 0) = 0.15
Education Index = (2/3) x 0.367 + (1/3) x 0.15 = 0.295
GDP : {log (1186) – log(100)} / {log(10000) – log(100)} = 0.413
HDI = (1/3) (0.50 + 0.295 + 0.413) = 0.403
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Calculating the HDI
As for any index, the key thing is how to rank different countries – the HDI uses minimum and maximum values of average age expectancy, of average education level and of average GDP per capita (using purchasing power parity information so takes into account the cost of living in each country relative to a base currency (the $US).
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Interpretation
• The simple rule of interpretation of the various HDI measures is the higher the HDI the better the country.
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Advantages:
– Tool for advocacy
– Ranking of areas
– Tool for research (if composite measure of development is needed)
– More reliable tool than per capita income measures for capturing improvement in human well-being
– Registers potential impact of over-development
– Politically appropriate – focuses on social sectors, policies and achievements
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Critiques:
– Composite indicators may hide more than reveal
– Fundamental problem of weighting and aggregation
– Sometimes mixing of output and input indicators: not useful as evaluation tool
– No immediate uses for policy design: tailor made tools required
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Critiques:
• What about inequality?• Can it capture policy changes?• Ranking countries – unknown uncertainties• Why cap values?• Why have an index at all?
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Critiques:
• What about future generations – an environmental degradation component?
• Political freedoms and rights?
• Culture
• Nutritional status
• Uncertainty
• Personal security
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Critiques that have been incorporated
• Absolute maximum and minimum values for each indicator
• Supplementing literacy with a second education indicator
• Changing the adjustment of GDP per capita
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Political freedom
• Political freedom index (PFI) presented in HDR 1991
• Meant to be incorporated in the HDI
• Caused technical and political controversy
• Ultimately dropped because of the difficulties of measurement
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Key data problems
• Literacy
– Conceptually and practically limited
– Definition and collection of literacy varies widely from country to country
– Culturally specific: script systems and other factors vary across the world
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Key data problems
• GDP per capita (PPP US$)
– Based on the ICP programme, limited to some 60 countries
– Based on regressions for other countries
– Imperfect measure but certainly better than exchange rate terms
• Life expectancy
– Should measure “long and healthy life” but does not take into account health, just length
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Why has the HDI been successful?
• HDI has become one of the best known and most used indicators of development.
• Despite some remaining controversies, broadly accepted and used by media, policymakers and academics
• What factors likely contributed?
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Policy relevance, and acceptability
• Underpinned by four aspects:
– Conceptual clarity that facilitates its power as a tool of communication
– Reasonable level of aggregation
– Use of universal criteria and variables
– Use of standardized international data explicitly designed for comparison
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Conceptual clarity
• Specification of the HDI derived from a clearly defined concept:
– Dimensions and variables correspond to the concepts of human development
– Meaning of variables intuitively understandable
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Reasonable level of aggregation
• HDI focuses on a set of universally -applicable core issues
• Aggregating too many issues tends to compromise analytical usefulness and policy relevance
• Separate indices for e.g. gender empowerment, human poverty
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Universal Acceptance
• Universally-relevant concepts and variables
• High degree of consensus that more is better in each of the variables
• In contrast with e.g. election frequency, voter turnout, share of largest party
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Universal Acceptance
• Uses data that are legitimized through the international statistical system
– Of course, still data problems but data have been standardized to ensure inter-country comparability
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Appropriate uses of the HDI
• Ordinal vs. cardinal – HDI value has a meaning but it is not intuitive and should be used carefully
• Ranking
• Example: reversals in HDI? Arguably meaningful exercise, if weights are accepted
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HDI Trend for India
Year of Publication of Global HDR
HDI Value HDI Rank
(Number of countries in parentheses)
2005
2004
0.619 (2005)
0.595(2002)
128 (out of 177 countires)
127 (out of 177 countries)
2003 0.590 (2001) 127 (out of 175 countries)
2002 0.577 (2000) 124 (out of 173 countries)
2001 0.571(1999) 115 (out of 162 countries)
2000 0.563 (1998) 128 (out of 174 countries)
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HDI & GEI for India: Departures from UNDP Indices
UNDP-Indicators Attainments NHDR-Indicators
Life Expectancy at Birth (LEB)
Longevity Life expectancy at age 1 & IMR
Adult Literacy Rate combined with enrolment ratio
Educational attainment
Literacy rate 7+ & Intensity of formal Education
Real GDP per capita in PPP $ Economic attainment
Per capita real consumption exp. adjusted for inequality; worker-popln. ratio in case of gender equality index
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Human Development Index for India — Combined
States/UTs 1981 Value
1981 Rank
1991 Value
1991 Rank
2001 Value
2001 Rank
Andhra Pradesh 0.298 9 0.377 9 0.416 10
Assam 0.272 10 0.348 10 0.386 14
Bihar 0.237 15 0.308 15 0.367 15
Gujarat 0.360 4 0.431 6 0.479 6
Haryana 0.360 5 0.443 5 0.509 5
Karnataka 0.346 6 0.412 7 0.478 7
Kerala 0.500 1 0.591 1 0.638 1
Madhya Pradesh 0.245 14 0.328 13 0.394 12
Maharashtra 0.363 3 0.452 4 0.523 4
Orissa 0.267 11 0.345 12 0.404 11
Punjab 0.411 2 0.475 2 0.537 2
Rajasthan 0.256 12 0.347 11 0.424 9
Tamil Nadu 0.343 7 0.466 3 0.531 3
Uttar Pradesh 0.255 13 0.314 14 0.388 13
West Bengal 0.305 8 0.404 8 0.472 8
All India 0.302 0.381 0.472
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HDI – INDIA & MAJOR STATES 2001
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Constant Marginal Utility of Income Assumption: Rs 1 = 1 util at all levels
Scenario I II III
Citizen Income Utility Income Utility Income Utility
A 100 100 200 200 150 150
B 100 100 0 0 50 50
Total 200 200 200 200 200 200
Per capit 100 100 100 100 100 100
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Declining Marginal Utility of IncomeAssumption: Rs 1 = 1 util up to Rs 100
Rs 1 = (1/2) util above Rs 100Scenario I II III
Citizen Income Utility Income Utility Income Utility
A 100 100 200 150 150 125
B 100 100 0 0 50 50
Total 200 200 200 150 200 175
Per capit 100 100 100 75 100 87.5
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Equivalent Incomes
Scenario I II III
Total 200 200 200
Equivalent Income
200 150 175
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Engendering the HDI: GDI and GEM
• Attempt to explore gender dimension of human development
• 1995: Beijing Conference and Global HDR
• Gender Development Index (GDI): simple measure of inequality between men and women on components of the HDI
• Gender Empowerment Measure (GEM): a positive measure of progress by women in the economic, professional and political spheres
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State Male Female Persons
Andhra Pradesh 50.35 26.43 38.51
Bihar 50.30 18.47 35.13
Gujarat 69.25 41.62 55.88
Haryana 64.17 31.23 48.92
Karnataka 63.78 37.46 50.94
Kerala 92.65 83.64 88.00
Madhya Pradesh 55.91 22.86 40.02
Maharashtra 74.36 45.33 60.37
Orissa 61.96 29.69 46.10
Punjab 61.29 43.39 52.90
Rajasthan 52.54 16.89 35.53
Tamil Nadu 69.92 43.87 57.02
Uttar Pradesh 53.95 20.99 38.62
West Bengal 67.98 42.98 56.19
INDIA 61.89 34.09 48.54
India: Adult Literacy Rate - 1991 Census
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The Gender-related development Index (GDI)
• Same components as the HDI
• After calculating dimension index for each sex – they are combined in a way to penalize gender equality (equally distributed index)
• The GDI is calculated by taking the un-weighted average of the three equally distributed indices
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The Gender-related development Index (GDI)
Formula for the equally distributed index:
1/11
1
)]}.(..[
)].(..{[
indexmalesharepopmale
indexfemalesharepopFemale
determines the size of gender equality in a society. In the global HDR it is set at 2.
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Goalposts for calculating the GDI
Indicator
Life expectancy
Female 27.5 years 87.5 years
Male 22.5 years 82.5 years
Adult literacy 0% 100%
Gross enrolment 0% 100%
GDP per capita $100(US) $40,000(US)
Minimum
Value
Maximum
value
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GDI-related information: Afghanistan 2005
Indicators(Step 1: Normalized
scores)
Female Male
Share of population 0.483 0.517
Life expectancy at birth 43.0
(43.0 – 27.5)/60 =0.258
43.1
(43.1 – 22.5) / 60 = 0.343
Adult literacy rate 12.6
(12.6 – 0.0) / 100 = 0.126
32.4
(32.4 – 0.0 ) /100 = 0.324
Gross enrolment 41.8
(41.8 – 0.0 ) / 100 = 0.418
73.7
(73.7 – 0.0 ) / 100 = 0.737
Estimated earned income (per capita GDP in PPP$)
478(log(478) – log(100))
/(log(40000 – log(100))= 0.261
1428(log(1428) – log(100))
/(log(40000 – log(100))= 0.444
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GDI-computation: Nepal 2000
Step 2: Education attainment index
Female (2/3) x 0.126 + (1/3) x 0.418 = 0.223
Male (2/3) x 0.324 + (1/3) x 0.737 = 0.462
Step 3: Equally distributed indices
Life expectancy index [0.483 x 0.258-1 + 0.517 x 0.343-1 ]-1 = 0.296
Education index [0.483 x 0.223-1 + 0.517 x 0.462-1 ]-1 = 0.305
Income index [0.483 x 0.261-1 + 0.517 x 0.444-1 ]-1 = 0.332
Step 4: GDI = (1/3) x (0. + 0. + 0. ) = 0.310
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GDI-related information: Nepal 2000
Indicators(Step 1: Normalized
scores)
Female Male
Share of population 0.502 0.498
Life expectancy at birth 59.8
(59.8 – 27.5)/60 =0.538
59.3
(59.3 – 22.5) / 60 = 0.613
Adult literacy rate 35.4
(35.4 – 0.0) / 100 = 0.354
65.8
(65.8 – 0.0 ) /100 = 0.658
Mean years of schooling 2.2527
(2.2527 – 0.0 ) / 15 = 0.150
4.4522
(4.4522 – 0.0 ) / 15 = 0.297
Estimated earned income (per capita GDP in PPP$)
911(log(911) – log(100))
/(log(40000 – log(100))= 0.369
1565(log(1565) – log(100))
/(log(40000 – log(100))= 0.459
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GDI-computation: Nepal 2000
Step 2: Education attainment index
Female (2/3) x 0.354 + (1/3) x 0.150 = 0.286
Male (2/3) x 0.658 + (1/3) x 0.297 = 0.538
Step 3: Equally distributed indices
Life expectancy index [0.502 x 0.538-1 + 0.498 x 0.613-1 ]-1 = 0.573
Education index [0.502 x 0.286-1 + 0.498 x 0.538-1 ]-1 = 0.373
Income index [0.502 x 0.369-1 + 0.498 x 0.459-1 ]-1 = 0.409
Step 4: GDI = (1/3) x (0.573 + 0.373 + 0.409 ) = 0.452
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Gender Empowerment Measure (GEM)
• Focusing on women’s opportunities rather than capabilities, in terms of :
– Political participation (% share of parliamentary seats)
– Economic participation (% share as in managerial and technical positions)
– Power over economic resources (estimated earned income, PPP US$)
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The Gender Empowerment Measure
Dimensions: Indicators:Political participation and decision making
Share of parliamentary seats
Economic participation and decision making
Share of positions as legislators, senior officials and managers; and profesional and technical workers
Power over economic resources
Share of estimated earned income
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The Gender Empowerment Measure
• Equally distributed equivalent percentage (EDEP) calculated for each dimension:
={[female popn. share(female index1-)] +
[male popn. share(male index1-)]}1/1-, where = 2.
• The EDEP for political and economic participation indexed by dividing it by 50 assuming equal empowerment of the sexes
• GEM = simple average of the 3 indexed EDEPs
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The Gender Empowerment Measure
Calculate dimension index and equally distributed equivalent percentage (EDEP) for each dimension (like GDI)
For political and economic decision making divide EDEP by 50 (the ideal share women should have)
N.B. For political and economic decision making EDEP can be calculated directly (as indicators are already %)
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Income is not logged in the calculation of the income index.
Again = 2, for moderate penalisation of inequality
The Gender Empowerment Measure
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GEM: Nepal 2000
Indicators Female Male
Share of population 0.502 0.498
Share of participation in local elections (%)
19.3 80.7
Share of participation in professional job (%)
19.51 80.49
Share of participation in admin. Job (%)
10.62 89.5
Estimated earned income (per capita GDP PPP$)
91 1565
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GEM Computation: Nepal 2000
Step 1: Compute equally distributed equivalent % (EDEP)
Political participation
Combined share (CS) = [ 0.502 x (19.3) -1 + 0.498 x (80.7)-1]-1 = 31.074
EDEI = 31.074 / 50 = 0.621
Economic participation
CS Eco. Participation= [ 0.502 x (19.51)-1 + 0.498 x (80.49)-1]-1 = 31.331
EDEI = 31.331 / 50 = 0.627
Combined shares of admin jobs
[ 0.502 x (10.65)-1 + 0.498 x (89.5)-1]-1 = 18.972
EDEI = 18.972 / 50 = 0.379
EDEI for economic participation
(0.627 + 0.379) / 2 = 0.503
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GEM Computation: Nepal 2000 (contd.)
Step 1: Compute equally distributed equivalent % (EDEP)
Income Normalized score for women’s income = (911-100) / (40000-100) = 0.020
Normalized score for men’s income = (1565-100) / (40000-100) = 0.037
EDEI = [ 0.502 x (0.020)-1 + 0.498 x (0.037)-1]-1 = 0.026
Step 2: EDEI aggregation
GEM ( 0.621 + 0.503 + 0.026) / 3 = 0.384
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Afghanistan
• GEM could not be calculated for want of data: Nether NHDR 2004 nor NHDR 2007
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Human Poverty Index (HPI)
• Measures the extent of deprivation in HDI’s three dimensions
• HPI –1 is calculated for developing countries
• HPI-2 is calculated for industrialized countries
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The deprivational perspective
• HDI and GDI focus on national averages (conglomerate aspect)
– Conglomerate Perspective: Focus on advances made by all groups in the society
• HPI focuses on the worst off (deprivation aspect)
– Deprivation perspective: Focus on the poor and the deprived.
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Why separate indices
• Distinguishing between developing and OECD countries recognized the relative nature of poverty
• Allows the use of richer, more appropriate data
• Different deprivations are more relevant in different contexts
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IndicatorsDimensions
• A long and healthy life
• Knowledge
• A decent standard of
living
• Probability at birth of not surviving until age 40
• Adult illiteracy rate
• Access to safe water
• Children underweight for age
The Human Poverty Index for developing countries (HPI-1)
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The Human Poverty Index (HPI-1)
Where:P1=Probability at birth of not surviving to age 40 (times 100)P2=Adult illiteracy rateP3= Average of people without access to safe water and children underweight
As rises greater weight is given to the dimension in which there is most deprivation. =1 implies simple
average (perfect substitutability), =∞ tests HPI = highest value (no substitutability). In he global HDR =3, giving additional but not overwhelming weight to areas of most acute deprivation
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in the HPI formula
• As rises greater weight is given to the dimension in which there is most deprivation.
=1 implies simple average (perfect substitutability),
=∞ HPI = highest value (no substitutability).
• In the global HDR =3, giving additional but not overwhelming weight to areas of most acute deprivation
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HPI Computation: Afghanistan 2005
Basic information:
Probability at birth of not surviving to age 40 (%) = 41.9
Adult illiteracy rate (%) = 76.5
Chronic malnutrition among children U5 (%) = 50
Population without access to safe water (%) = 68
Step 1: Deprivation index for std. of living
= (50 + 68) / 2 =59
Step 2: Computation of HPI
HPI { (1/3) (41.93 + 76.53 + 593) }(1/3) = 62.3
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HPI Computation: Nepal 2004
Basic information:
Probability at birth of not surviving to age 40 (%) = 17.74
Adult illiteracy rate (%) = 51.4
Chronic malnutrition among children U5 (%) = 50.5
Population without access to safe water (%) = 20.48
Step 1: Deprivation index for std. of living
= (50.5 + 20.48) / 2 =35.49
Step 2: Computation of HPI
HPI { (1/3) (17.743 + 51.43 + 35.493) }(1/3) = 39.6
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Indicators
Dimensions
• A long and healthy life
• Knowledge
• A decent standard of
living
• Probability at birth of not surviving until age60
• Functional illiteracy rate
• Relative income poverty
• Long term unemployment
The Human Poverty Index for OECD countries (HPI-2)
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The Human Poverty Index (HPI-2)
Where:P1=Probability of not surviving to age 60 (times 100)P2=Functional illiteracy rateP3=Relative income poverty (population below 50% median income)P4 = Long-term unemployment
As rises greater weight is given to the dimension in which there is most deprivation. In the global HDR =3, giving additional but not overwhelming weight to areas of most acute deprivation
/14321 )](4/1[ PPPPHPI
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Discrimination through the lens of the HDI
Life
expectancy
Literacy
Income
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