Human Development Index (HDI): What It Is And How It Is Calculated
In the media, one often hears the expression Human Development Index, especially when talking about extremely rich European countries, such as Norway and Switzerland, or very poor countries, mostly in Africa.
This may make us think that this is an indicator of the wealth of a country, but this idea is not entirely correct.
The Human Development Index takes into account different factors that are considered necessary for people to live fully in the country in which they have lived. Below we will look at this concept in more depth, what it is based on, how it is calculated and what criticism it has received.
The Human Development Index (HDI) is an indicator born from the hand of the United Nations Development Program (UNDP) which serves to evaluate how developed a society is. It consists of an arithmetic measure that summarizes the advances and milestones of each country that lead to a better society, analyzed based on three main dimensions: hope, education and economic wealth.
The main objective of this indicator is to obtain objective data on the standard of living in each country in the world in order to, in this way, detect possible shortcomings and direct future international aid programs to resolve them These aids may include offering monetary resources to activate the economy, in addition to helping the country in providing educational and health structures to improve the cultural and health level of the population.
We have the origins of the concept in 1990, the year in which Mahbub ul Haq launched the United Nations Development Program (UNDP). This program not only sought to take into account purely economic factors corresponding to the wealth of a country, but also What policies does the state apply that are people-centered, especially in terms of quality of life and education?
What is meant by human development?
Human development is understood as process that a society goes through when there are improvements in the living conditions of its citizens These improvements not only imply an increase in the goods they have available, which will undoubtedly help them satisfy their basic needs such as food, housing and transportation.
It also implies the creation of an environment in which the human rights of each and every citizen residing in the country are respected, their right to education and to have a dignified life. Thus, greater human development can be understood as synonymous with a high degree of freedom and number of options available to be or do what one wants.
As we have already mentioned, this index is based on three dimensions, considered as factors that determine whether a society is fully developed or not.
1. Life expectancy
This measure is basically based on the average number of years that a person is expected to live having been born and living in his or her country This measure also includes having access to adequate health services that facilitate living a long and healthy life.
2. Education
The dimension of education evaluated in the human development index is based on the country’s adult literacy rate, the gross rate combined with enrollment in education at different levels (primary, secondary and higher), as well as the years of duration of compulsory education.
3. Economic wealth
economic wealth It is measured based on the gross domestic product (GDP) per capita
How is the HDI calculated?
The calculation of the human development index is done taking into account various measures corresponding to life expectancy, education and wealth. That is why Every year the UNDP collects data from different UN programs to develop this indicator
Among the sources consulted are UNDESA, which measures life expectancy at birth, UNESCO, ICF Macro Demographic and Health Surveys, UNICEF and OECD surveys, which measure life expectancy and average years of schooling, and the World Bank, the IMF and the United Nations Statistics Division, whose data indicate gross domestic product per capita.
When the UNDP has the data for each country, the dimension indices must first be developed, values with which it will be possible to obtain the human development index itself. Each country can obtain the following scores for each dimension index:
Steps to follow
To calculate the dimension index for each specific case, the following formula is used:
Dimension index = (current value – minimum value) / (maximum value – minimum value)
The values of each dimension index seen above are not arbitrary. If a country has the maximum in everything, its HDI is 1, which means that it has a very high level of development. On the other hand, if you have minimums in everything, your HDI will be 0.
The minimum value set for life expectancy is 20, because, since the 20th century, there is evidence that no country on Earth has a life expectancy lower than that age. As for its maximum, 85 years, it is considered a realistic measure according to the UNDP itself.
In education, both for the expected years of schooling and for the average, the minimum is 0. The expected years of schooling sets its maximum limit at age 18, which is equivalent to having obtained a university degree in most countries. countries of the world. On the other hand, average schooling sets its maximum at 15 years, which is the maximum projected for this indicator for the coming years.
Finally we have the GDP per capita, setting its minimum figure at 100 constant dollars under purchasing power parity (PPP), and its maximum at 75,000 PPP dollars. The minimum is $100 because, even in countries where reliable income data has not been collected, that amount of income is needed to survive. On the contrary, the maximum is set at $75,000 because, based on studies by Kahneman and Deaton (2010), there are no significantly different gains in human development and well-being when GDP exceeds that figure.
Finally, once the indices of each dimension have been calculated, The calculation of the Human Development Index itself is carried out, using the following formula:
HDI = (Health Index X Education Index X Income Index)^⅓
As we have already mentioned, the Education Index is based on two measures, the expected number of years of schooling and the average number of years of schooling. To calculate it, the arithmetic mean of the two components is taken. Regarding the income index, The variables are taken into account in base 10 logarithms to adjust the calculations
HDI calculation example
Let’s imagine an imaginary country with the following data:
First we calculate the dimension indices of each of the three dimensions
1. Health Index
Health Index = (70 – 20) / (85 – 20) = 0.77
2. Education Index
3. Income rate
Income Index = log(10,300) – log(100) / log(75,000) – log(100) = 0.70
Once the dimension indices have been calculated, only the final step remains: calculate the human development index.
4. Human Development Index
HDI = (Health Index X Education Index X Income Index)^⅓
We substitute in the formula:
Human Development Index = (0.77 · 0.93 · 0.70) raised to 1/3 = 0.8
Human Development Index Scores
After researching and studying the characteristics of each sovereign state, the Human Development Index assigns values to each of them These values range between 0 and 1, and are organized in lists that go from highest to lowest degree of human development. The categories given to the country based on its score are the following.
Very high human development: scores greater than 0.80.
High human development: scores between 0.700 and 0.799.
Average human development: scores between 0.550 and 0.699.
Currently, the country with the highest human development index is Norway with a score of 0.954, while the country with the lowest is Niger, with a score of 0.377.
Criticisms of this index
Although it has served a lot, especially to raise awareness that not only wealth determines how developed a country is, the Human Development Index has not been without controversy. There are many people who consider that this indicator is not a completely reliable magnitude
To begin with, the HDI is only an indicator, it cannot cover the entire reality that constitutes a society, leaving aside variables that may reflect a delicate situation in a country, no matter how good the educational, health and wealth system it may have. For example, if a country that had an HDI of 1 suddenly suffered a sharp drop in its GDP and people began to starve, the HDI would not reflect this, since life expectancy would gradually fall. Thus, the HDI is an indicator of how developed society is in the long term.
Although the organizations that UNDP relies on to obtain its information are quite reliable, they are not infallible The UNDP compares data from different institutions, offering a final combined data, which can be the combination of very precise data or, coincidentally, that could be wrong.
Another important aspect in which the human development index failed until recently was the issue of inequality. To understand this, let’s imagine a country in which half of the population has a life expectancy of 80 years, while the other half has a life expectancy of 20. Basically, half of the population lives four times longer than the other. half, showing great inequality. However, taking the average life expectancy we would obtain that in that country people live, on average, about 50 years
Finally, One of the criticisms that has been made of him has been his conception of education This index gives rise to the idea that the more years you have received, the better education you have received. This idea turns out to be fallacious, given that one can have been in school for many years and have received a bad education or have studied for a few years and have received good quality knowledge.
A. Stanton, E. (2007). The Human Development Index: A History. PERI Working Papers: 14–15.
Kahneman, D.; Deaton, A. (2010). “High income improves evaluation of life but not emotional well-being.” Proceedings of the National Academy of Sciences. 107 (38): 16489–16493.
López, FJ (2019). Guide to calculate and interpret the HDI. Spain: economipedia. Extracted from https://economipedia.com/guia/guia-para-calcular-e-interpretar-el-idh.html
