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Diminishing returns to GDP and the Human Development Index

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  • Miles Cahill

Abstract

This paper investigates the assumption of the human development index (HDI) that per capita GDP has diminishing returns to development. Alternative returns to scale assumptions for per capita GDP are evaluated using correlation and principal components analyses conducted on four separate samples of countries. Specifically, the correlation between various transformations of GDP and the other elements of the HDI are examined, and the principal components method of factor analysis is used to construct HDI-like indexes with the alternative transformations of GDP. Results generally support the diminishing returns assumption employed by the HDI, as a concave transformation of GDP is most highly correlated with the other variables, and the corresponding principal components HDI construction explains the largest amount of the variance of the original variables.

Suggested Citation

  • Miles Cahill, 2002. "Diminishing returns to GDP and the Human Development Index," Applied Economics Letters, Taylor & Francis Journals, vol. 9(13), pages 885-887.
    • Handle: RePEc:taf:apeclt:v:9:y:2002:i:13:p:885-887
    DOI: 10.1080/13504850210158999
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    Cited by:

    1. Francisco J. Arcelus & Kanhaiya Lal Sharma & Gopalan Srinivasan, 2005. "The Human Development Index Adjusted for Efficient Resource Utilization," WIDER Working Paper Series RP2005-08, World Institute for Development Economic Research (UNU-WIDER).
    2. Mehmet Pinar & Thanasis Stengos & Nikolas Topaloglou, 2013. "Measuring human development: a stochastic dominance approach," Journal of Economic Growth, Springer, vol. 18(1), pages 69-108, March.
    3. Miles Cahill, 2005. "Is the Human Development Index Redundant?," Eastern Economic Journal, Eastern Economic Association, vol. 31(1), pages 1-5, Winter.
    4. Iyad Dhaoui, 2019. "Achieving Sustainable Development Goals in MENA countries: an Analytical and Econometric Approach [Achèvement es objectifs de développement durable dans les pays de la région MENA: Une approche ana," Working Papers hal-02075484, HAL.
    5. Benjamin Schneider, 2022. "Good Jobs and Bad Jobs in History," Oxford Economic and Social History Working Papers _202, University of Oxford, Department of Economics.
    6. Mark McGillivray & Farhad Noorbakhsh, 2004. "Composite Indices of Human Well-being: Past, Present, and Future," WIDER Working Paper Series RP2004-63, World Institute for Development Economic Research (UNU-WIDER).
    7. Elizabeth Stanton, 2007. "The Human Development Index: A History," Working Papers wp127, Political Economy Research Institute, University of Massachusetts at Amherst.
    8. Tauhidur Rahman, 2007. "Measuring the well-being across countries," Applied Economics Letters, Taylor & Francis Journals, vol. 14(11), pages 779-783.
    9. Dhaoui, Iyad, 2018. "Achieving Sustainable Development Goals in MENA countries: an Analytical and Econometric Approach," MPRA Paper 92471, University Library of Munich, Germany.
    10. Nayak, Purusottam, 2013. "Methodological Developments in Human Development Literature," MPRA Paper 50608, University Library of Munich, Germany.

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