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Maximizing Human Development

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Author Info

  • Merwan Engineer

    (University of Victoria, Canada)

  • Ian King

    (The University of Melbourne, Australia)

Abstract

The 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. Maximization of the HDI leads to consumption (excluding education and health expenditures) being pushed to minimal levels. It also leads to the overaccumulation of education and/or health capital and possibly physical capital, relative to the standard golden rule. We propose an alternative specification of the HDI, where permanent consumption replaces income as the proxy for a decent standard of living. Maximization of this alternative index yields a "human development golden rule" which balances consumption, education and health expenditure in promoting human development. We also advocate the method of optimization subject to constraints for revealing the consequences of taking a policy measure seriously and testing its congruence with its underlying philosophy.

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Bibliographic Info

Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 30_12.

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Date of creation: Jun 2012
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Handle: RePEc:rim:rimwps:30_12

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Keywords: Economic growth; Human Development Index; Planning;

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References

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  1. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151, November.
  2. King, Ian & Ferguson, Don, 1993. "Dynamic inefficiency, endogenous growth, and Ponzi games," Journal of Monetary Economics, Elsevier, vol. 32(1), pages 79-104, August.
  3. Rivera, Berta & Currais, Luis, 1999. "Income Variation and Health Expenditure: Evidence for OECD Countries," Review of Development Economics, Wiley Blackwell, vol. 3(3), pages 258-67, October.
  4. Charles I. Jones & Peter J. Klenow, 2010. "Beyond GDP? Welfare across Countries and Time," NBER Working Papers 16352, National Bureau of Economic Research, Inc.
  5. Lars Osberg & Andrew Sharpe, 2005. "How Should We Measure The "Economic" Aspects Of Well-Being? ," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(2), pages 311-336, 06.
  6. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  7. Jerry R. Green & Nancy L. Stokey, 1982. "A Comparison of Tournaments and Contracts," NBER Working Papers 0840, National Bureau of Economic Research, Inc.
  8. 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.
  9. Green, Jerry & Stokey, Nancy, 1983. "A Comparison of Tournaments and Contracts," Scholarly Articles 3203644, Harvard University Department of Economics.
  10. Krishna Mazumdar, 2003. "A New Approach to Human Development Index," Review of Social Economy, Taylor & Francis Journals, vol. 61(4), pages 535-549.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Maximizing the Human Development Index
    by Economic Logician in Economic Logic on 2010-12-10 15:36:00
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Cited by:
  1. Mehmet Pinar & Thanasis Stengos & Nikolas Topaloglou, 2012. "Measuring Human Development: A Stochastic Dominance Approach," Working Paper Series 42_12, The Rimini Centre for Economic Analysis.

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