The Human Development Index as a Criterion for Optimal Planning
AbstractPlanning strategies that maximize the Human Development Index (HDI) tend towards minimizing consumption and maximizing non-investment expenditures on education and health. Interestingly, such strategies also tend towards equitable outcomes, even though inequality aversion is not modelled in the HDI. A problematic feature of strategies that maximize the HDI is that the income component in the index only role is to distort the allocation between health and education expenditure. Because the income component does not play its intended role of securing resources for a decent standard of living, we argue that it is better to drop income from the index in considering optimal plans. Alternatively, we consider net income, income net of education and health expenditures, as indicator of capabilities not already reflected in the education and life expectancy components of the index. When net income is used in a modified HDI index, optimal plans yield a balance between allocations for consumption, education, and health. Finally, we calculate our modified indexes for OECD countries and compare them with the HDI.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1041.
Length: 27 pages
Date of creation: 2008
Date of revision:
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Postal: Department of Economics, The University of Melbourne, 5th Floor, Economics and Commerce Building, Victoria, 3010, Australia
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Web page: http://www.economics.unimelb.edu.au
More information through EDIRC
Consumption; Human development index; Income; Inequality; Planning;
Other versions of this item:
- Merwan Engineer & Ian King & Nilanjana Roy, 2008. "The human development index as a criterion for optimal planning," Indian Growth and Development Review, Emerald Group Publishing, vol. 1(2), pages 172-192, December.
- O21 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
- NEP-DEV-2008-11-25 (Development)
- NEP-EDU-2008-11-25 (Education)
- NEP-HAP-2008-11-25 (Economics of Happiness)
- NEP-HRM-2008-11-25 (Human Capital & Human Resource Management)
- NEP-PKE-2008-11-25 (Post Keynesian Economics)
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