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A New Multidimensional Measure of Development: The Role of Technology and Institutions

Author

Listed:
  • K. Renuka Ganegodage

    (The University of Queensland)

  • Alicia N. Rambaldi

    () (The University of Queensland)

  • D. S. Prasada Rao

    (The University of Queensland)

  • Kam K. Tang

    (The University of Queensland)

Abstract

Abstract This paper constructs four structural indices by using 42 socioeconomic variables for 129 countries and the 10 years period from 2003 to 2012. Each structural index can be considered as a measure of a certain dimension of development. The first two indices are the most useful in explaining gaps in development across countries. The first captures the role of technology and institutional quality while the second provides a measure of the basic level of development. The contrast between them signifies that the notion of development is not only multidimensional, but also changing with the stage of development. These two indices are combined to form a development index (DI). A comparison of DI to income per capita and the Human Development Index highlights the importance of institutions in the transition of countries from merely having high income to full development. A methodological contribution of the paper is to use a Jackknife approach within the factor analysis routine to test for the significance of the extracted factors/indices.

Suggested Citation

  • K. Renuka Ganegodage & Alicia N. Rambaldi & D. S. Prasada Rao & Kam K. Tang, 2017. "A New Multidimensional Measure of Development: The Role of Technology and Institutions," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(1), pages 65-92, March.
  • Handle: RePEc:spr:soinre:v:131:y:2017:i:1:d:10.1007_s11205-015-1139-7
    DOI: 10.1007/s11205-015-1139-7
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    Keywords

    Development index; Institutions; Factor analysis; Standard errors; Real income; HDI;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other

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