The Human Development Index in 1994: Impact of Income on Country Rank

Article type: Research Article

Authors: Gormely, Patrick J.^a

Affiliations: [a] Department of Economics, Kansas State University, Manhattan, KS 66506, USA

Abstract: The Human Development Report published annually by the United Nations Development Programme (UNDP) computes for each country a Human Development Index (HDI). The HDI is a composite index constructed from measures of life expectancy, education, and per-capita income. This paper argues that the UNDP's method of estimating the contribution of per-capita income to human development is inappropriate and leads to misleading country HDI rankings. For countries below the world-average per-capita income, the UNDP's estimation formula allows per-capita income to make a large contribution to development, as measured by each country's HDI. But for countries above the world-average per-capita income, their higher incomes are effectively estimated to make no additional contribution to their human development, as measured by HDI. An alternative treatment of income is illustrated. The consequent modified HDIs result in an appreciable alteration of the country rankings.

DOI: 10.3233/JEM-1995-21401

Journal: Journal of Economic and Social Measurement, vol. 21, no. 4, pp. 253-267, 1995