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Consequences of data error in aggregate indicators : evidence from the humand development index

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Author Info

  • Wolff, Hendrik
  • Chong, Howard
  • Auffhammer, Maximilian

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

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

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References

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  1. Sudhir Anand and Amartya Sen, 2000. "The Income Component of Human Development Index," Human Development Occasional Papers (1992-2007) HDOCPA-2000-01, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
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  4. 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.
  5. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
  6. Tomson Ogwang, 2000. "Inter-country inequality in human development indicators," Applied Economics Letters, Taylor & Francis Journals, vol. 7(7), pages 443-446.
  7. 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.
  8. 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.
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  10. 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.
  11. Stephen Morse, 2003. "Greening the United Nations' Human Development Index?," Sustainable Development, John Wiley & Sons, Ltd., vol. 11(4), pages 183-198.
  12. 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.
  13. 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.
  14. Sudhir Anand & Amartya Sen, 2000. "The Income Component of the Human Development Index," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 1(1), pages 83-106.
  15. J. Ram Pillarisetti, 1997. "An empirical note on inequality in the world development indicators," Applied Economics Letters, Taylor & Francis Journals, vol. 4(3), pages 145-147.
  16. Desai, Meghnad, 1991. "Human development : Concepts and measurement," European Economic Review, Elsevier, vol. 35(2-3), pages 350-357, April.
  17. Krishna Mazumdar, 2002. "A note on cross-country divergence in standard of living," Applied Economics Letters, Taylor & Francis Journals, vol. 9(2), pages 87-90.
  18. 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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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.
  2. Kobi Abayomi & Gonzalo Pizarro, 2013. "Monitoring Human Development Goals: A Straightforward (Bayesian) Methodology for Cross-National Indices," Social Indicators Research, Springer, vol. 110(2), pages 489-515, January.

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