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

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

    ()

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

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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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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  1. 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.
  2. Quah, Danny, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEPR Discussion Papers 1355, C.E.P.R. Discussion Papers.
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  13. 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.
  14. Tomson Ogwang, 2000. "Inter-country inequality in human development indicators," Applied Economics Letters, Taylor & Francis Journals, vol. 7(7), pages 443-446.
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  16. 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.
  17. 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.
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  19. Noorbakhsh, Farhad, 2006. "International Convergence or Higher Inequality in Human Development? Evidence for 1975 to 2002," Working Paper Series RP2006/15, World Institute for Development Economic Research (UNU-WIDER).
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