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Human Development Index: Are Developing Countries Misclassified? (former title: "Consequences of Data Error in Aggregate Indicators: Evidence from the Human Development Index)

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Author Info
Wolff, Hendrik
Chong, Howard
Auffhammer, Maximilian
Abstract

This paper examines the consequences of data error in data series used to construct aggregate indicators. Using the most popular indicator of country level economic development, the Human Development Index (HDI), we identify three separate sources of data error. We propose a simple statistical framework to investigate how data error may bias rank assignments and identify two striking consequences for the HDI. First, using the cutoff values used by the United Nations to assign a country as ‘low’, ‘medium’, or ‘high’ developed, we find that currently up to 45% of developing countries are misclassified. Moreover, by replicating prior development/macroeconomic studies, we find that key estimated parameters such as Gini coefficients and speed of convergence measures vary by up to 100% due to data error.

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Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49763.

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Date of creation: 2009
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Handle: RePEc:ags:aaea09:49763

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Related research
Keywords: Measurement Error; International Comparative Statistics; International Development; O10; C82;

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  1. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Ogwang, Tomson, 2000. "Inter-country Inequality in Human Development Indicators," Applied Economics Letters, Taylor and Francis Journals, vol. 7(7), pages 443-46, July. [Downloadable!] (restricted)
  3. Desai, Meghnad, 1991. "Human development : Concepts and measurement," European Economic Review, Elsevier, vol. 35(2-3), pages 350-357, April. [Downloadable!] (restricted)
  4. Pillarisetti, J Ram, 1997. "An Empirical Note on Inequality in the World Development Indicators," Applied Economics Letters, Taylor and Francis Journals, vol. 4(3), pages 145-47, March. [Downloadable!] (restricted)
  5. Subhayu Bandyopadhyay & Howard J. Wall, 2006. "The Determinants of Aid in the Post-Cold War Era," Working Papers 06-14, Department of Economics, West Virginia University. [Downloadable!]
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  6. Baliamoune-Lutz, Mina N., 2004. "On the Measurement of Human Well-being: Fuzzy Set Theory and Sen's Capability Approach," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  7. Leandro Prados de la Escosura, 2007. "International inequality and polarization in living standards, 1870-2000 : evidence from the Western World," Working Papers in Economic History wp07-05, Universidad Carlos III, Departamento de Historia Económica e Instituciones. [Downloadable!]
  8. Alesina, Alberto & Dollar, David, 2000. " Who Gives Foreign Aid to Whom and Why?," Journal of Economic Growth, Springer, vol. 5(1), pages 33-63, March. [Downloadable!] (restricted)
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  9. Farhad Noorbakhsh, 1998. "The human development index: some technical issues and alternative indices," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(5), pages 589-605.
  10. Noorbakhsh, Farhad, 2006. "International Convergence or Higher Inequality in Human Development? Evidence for 1975 to 2002," Working Papers RP2006/15, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  11. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE. [Downloadable!]
  12. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September. [Downloadable!]
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  13. Kenneth Y. Chay & Patrick J. McEwan & Miguel Urquiola, 2005. "The Central Role of Noise in Evaluating Interventions That Use Test Scores to Rank Schools," American Economic Review, American Economic Association, vol. 95(4), pages 1237-1258, September. [Downloadable!]
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  14. Srinivasan, T N, 1994. "Human Development: A New Paradigm or Reinvention of the Wheel?," American Economic Review, American Economic Association, vol. 84(2), pages 238-43, May. [Downloadable!] (restricted)
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