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A Note on Human Development Indices with Income Equalities

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Abstract

Human Development Index (HDI) is a composite index obtained by a weighted aggregation of other three indices, each measuring one aspect, namely life expectancy, education and real per capita income. Intra-country equality in income distribution, however, is very important with regard to quality of life and, thus, human development. This paper is concerned with the question that if the measure of income equality also were included in construction of the HDI, then what would be the relative weights of different indices. One method could be to assign equal weights to all the four, but it is too pragmatic. Alternatively, the principal component analysis (PCA) may be applied to derive weights. But, again, the PCA is an overly elitist method that undermines the poorly correlated set of variables, which might be very important in their own right, in favor of highly correlated set of variables. We propose an alternative method that maximizes the sum of absolute coefficients of correlation of the composite index with the constituent indices. Such an index is inclusive in nature and gives proper representation to weakly correlated variables also. The method has been applied to data of 125 countries and the HDI so constructed has been compared with the PCA HDI and HDR (UNDP) HDI. We find substantial ups and downs in the HDI ranks of different countries.

Suggested Citation

  • Mishra, SK, 2007. "A Note on Human Development Indices with Income Equalities," MPRA Paper 3513, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:3513
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    References listed on IDEAS

    as
    1. Mishra, SK, 2007. "Construction of maximin and non-elitist composite indices - alternatives to elitist indices obtained by the principal components analysis," MPRA Paper 3338, University Library of Munich, Germany.
    2. Mishra, SK, 2007. "A Comparative Study of Various Inclusive Indices and the Index Constructed by the Principal Components Analysis," MPRA Paper 3377, University Library of Munich, Germany.
    3. Mishra, SK, 2007. "Socio-economic Exclusion of Different Religious Communities in Meghalaya," MPRA Paper 3441, University Library of Munich, Germany.
    4. Mishra, SK, 2007. "Construction of an Index by Maximization of the Sum of its Absolute Correlation Coefficients with the Constituent Variables," MPRA Paper 3333, University Library of Munich, Germany.
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    Cited by:

    1. Mishra, SK, 2012. "A note on the indeterminacy and arbitrariness of pena’s method of construction of synthetic indicators," MPRA Paper 37534, University Library of Munich, Germany.
    2. Mishra, SK, 2012. "A note on construction of heuristically optimal Pena’s synthetic indicators by the particle swarm method of global optimization," MPRA Paper 37625, University Library of Munich, Germany.
    3. Mishra, SK, 2012. "A maximum entropy perspective of Pena’s synthetic indicators," MPRA Paper 37797, University Library of Munich, Germany.
    4. Mishra, SK, 2007. "Analysis of Gender Disparity in Meghalaya by Various Types of Composite Indices," MPRA Paper 3612, University Library of Munich, Germany, revised 18 Jun 2007.

    More about this item

    Keywords

    Human development index; International comparison; HDI; income distribution; equality; relative weights; representation; inclusive; elitist; principal component; alternative method; UNDP; correlation; absolute;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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