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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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  • 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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Bibliographic Info

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

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  1. Stephen Morse, 2003. "Greening the United Nations' Human Development Index?," Sustainable Development, John Wiley & Sons, Ltd., vol. 11(4), pages 183-198.
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  13. Tomson Ogwang, 2000. "Inter-country inequality in human development indicators," Applied Economics Letters, Taylor & Francis Journals, vol. 7(7), pages 443-446.
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  15. Danny Quah, 1996. "Twin peaks : growth and convergence in models of distribution dynamics," LSE Research Online Documents on Economics 2278, London School of Economics and Political Science, LSE Library.
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  17. Desai, Meghnad, 1991. "Human development : Concepts and measurement," European Economic Review, Elsevier, vol. 35(2-3), pages 350-357, April.
  18. Arcelus Francisco J & Sharma Basu & Srinivasan Gopalan, 2005. "Foreign Capital Flows and the Efficiency of the HDI Dimensions," Global Economy Journal, De Gruyter, vol. 5(2), pages 1-14, June.
  19. Noorbakhsh, Farhad, 2006. "International Convergence or Higher Inequality in Human Development? Evidence for 1975 to 2002," Working Paper Series RP2006/15, World Institute for Development Economic Research (UNU-WIDER).
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