Maximizing Human Development
AbstractThe Human Development Index (HDI) is widely used as an aggregate measure of overall human well being. We examine the allocations implied by the maximization of this index, using a standard growth model — an extended version of Mankiw, Romer, andWeil’s (1992) model — and compare these with the allocations implied by the golden rule in that model. We find that maximization of the HDI leads to the overaccumulation of both physical and human capital, relative to the golden rule, and consumption is pushed to minimal levels. We then propose an alternative specification of the HDI, which replaces its income component with a consumption component. Maximization of this modified HDI yields a “human development golden rule” which balances consumption, education and health expenditures, and avoids the more extreme implications of the existing HDI.
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Bibliographic InfoPaper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1111.
Length: 29 pages
Date of creation: 2010
Date of revision:
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More information through EDIRC
Economic growth; Human Development Index; Planning;
Other versions of this item:
- 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-2010-11-13 (All new papers)
- NEP-DEV-2010-11-13 (Development)
- NEP-DGE-2010-11-13 (Dynamic General Equilibrium)
- NEP-HAP-2010-11-13 (Economics of Happiness)
- NEP-HRM-2010-11-13 (Human Capital & Human Resource Management)
- NEP-MIC-2010-11-13 (Microeconomics)
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