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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 University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1051.

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Length: 34pages
Date of creation: 2008
Date of revision:
Handle: RePEc:are:cudare:1051

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Postal: 207 Giannini Hall #3310, Berkeley, CA 94720-3310
Phone: (510) 642-3345
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Web page: http://areweb.berkeley.edu/library/Main/CUDARE
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Postal: University of California, Giannini Foundation of Agricultural Economics Library, 248 Giannini Hall #3310, Berkeley CA 94720-3310
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Related research

Keywords: measurement; international economics; human development Index; statistics;

Other versions of this item:

Find related papers by JEL classification:

• O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
• C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data

References

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1. Subhayu Bandyopadhyay & Howard J. Wall, 2006. "The determinants of aid in the post-cold war era," Working Papers 2006-021, Federal Reserve Bank of St. Louis.
   
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   • Subhayu Bandyopadhyay, 2006. "The Determinants of Aid in the Post-Cold War Era," Working Papers 06-14 Classification- JEL, Department of Economics, West Virginia University.
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   • Dollar, David & Alesina, Alberto, 2000. "Who Gives Foreign Aid to Whom and Why?," Scholarly Articles 4553020, Harvard University Department of Economics.
4. Desai, Meghnad, 1991. "Human development : Concepts and measurement," European Economic Review, Elsevier, vol. 35(2-3), pages 350-357, April.
5. Sudhir Anand & Amartya Sen, 2000. "The Income Component of the Human Development Index," Journal of Human Development and Capabilities, Taylor and Francis Journals, vol. 1(1), pages 83-106.
6. Kenneth Y. Chay & Patrick J. McEwan & Miguel Urquiola, 2003. "The Central Role of Noise in Evaluating Interventions that Use Test Scores to Rank Schools," NBER Working Papers 10118, National Bureau of Economic Research, Inc.
   
   • 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.
   • Kenneth Chay & Patrick J. McEwan & Miguel Urquiola, 2003. "The Central Role of Noise in Evaluating Interventions that Use Test Scores to Rank Schools," Discussion Papers 0304-10, Columbia University, Department of Economics.
7. 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.
8. Alberto Alesina & Beatrice Weder, 1999. "Do Corrupt Governments Receive Less Foreign Aid?," NBER Working Papers 7108, National Bureau of Economic Research, Inc.
   
   • 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.
9. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
10. 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.
11. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
    
    • Quah, Danny T, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," Economic Journal, Royal Economic Society, vol. 106(437), pages 1045-55, July.
12. J. Ram Pillarisetti, 1997. "An empirical note on inequality in the world development indicators," Applied Economics Letters, Taylor and Francis Journals, vol. 4(3), pages 145-147.
13. Alesina, Alberto & Weder, Beatrice, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," Scholarly Articles 4553011, Harvard University Department of Economics.
14. 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.
15. Guindon, G. Emmanuel & Boisclair, David, 2003. "Past, Current and Future Trends in Tobacco Use," University of California at San Francisco, Center for Tobacco Control Research and Education qt4q57d5vp, Center for Tobacco Control Research and Education, UC San Francisco.
16. Tomson Ogwang, 2000. "Inter-country inequality in human development indicators," Applied Economics Letters, Taylor and Francis Journals, vol. 7(7), pages 443-446.

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Cited by:

1. Andrea Brandolini & Giovanni Vecchi, 2011. "The Well-Being of Italians: A Comparative Historical Approach," Quaderni di storia economica (Economic History Working Papers) 19, Bank of Italy, Economic Research and International Relations Area.

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