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Maximizing Human Development

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  • Merwan Engineer
  • Ian King

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 — 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.

Suggested Citation

  • Merwan Engineer & Ian King, 2010. "Maximizing Human Development," Department of Economics - Working Papers Series 1111, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:1111
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    1. Maximizing the Human Development Index
      by Economic Logician in Economic Logic on 2010-12-10 21:36:00

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    2. Mehmet Pinar & Thanasis Stengos & Nikolas Topaloglou, 2013. "Measuring human development: a stochastic dominance approach," Journal of Economic Growth, Springer, vol. 18(1), pages 69-108, March.

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    More about this item

    Keywords

    Economic growth; Human Development Index; Planning;
    All these keywords.

    JEL classification:

    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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