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Efficiency of Pena’s P2 Distance in Construction of Human Development Indices

Author

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  • Nayak, Purusottam
  • Mishra, SK

Abstract

The paper is an attempt to evaluate the efficiency of Pena’s DP-2 method over a host of methods used to make composite indices. To undertake this exercise, variables and data used and methodology adopted in Human Development Report 2011 are employed along with nine other methodologies employed by other scholars. Although there is no agreed principle of judging an index to be best among alternative indices, it may be suggested that the composite index which is most informative among all other indices may be considered as the most acceptable one. The present study reveals that Pena-DP2 index and Penmax index have close similarity. Computationally, Pena’s method of construction of index is much simpler, but the interpretation of Penmax index is more straightforward. On the other hand, Maxmin index is norm-based and has a justification on Wald’s principle of decision-making. The Maxmin index also is the most egalitarian index against the Principal Component based index, which is known to be most elitist. On ‘sum of absolute correlation’ and ‘sum of squared correlation’, too, the Maxmin index is superior to other indices. It appears, therefore, that the Maxmin composite index which is obtained by maximization of minimum of correlation between the composite index and the constituent variables is a better than others. Further, if we go by the argument of Neumann and Morgenstern none of the composite indices is a cardinal measure in the strict sense of measurement.

Suggested Citation

  • Nayak, Purusottam & Mishra, SK, 2012. "Efficiency of Pena’s P2 Distance in Construction of Human Development Indices," MPRA Paper 39022, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:39022
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    File URL: https://mpra.ub.uni-muenchen.de/39022/1/MPRA_paper_39022.pdf
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    References listed on IDEAS

    as
    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. Adam Okulicz-Kozaryn, 2012. "Income and Well-being Across European Provinces," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 106(2), pages 371-392, April.
    3. Satya R. Chakravarty, 2003. "A Generalized Human Development Index," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 99-114, February.
    4. Mishra, SK, 2012. "A comparative study of trends in globalization using different synthetic indicators," MPRA Paper 38028, University Library of Munich, Germany.
    5. Hippu Salk Kristle Nathan & Srijit Mishra & B. Sudhakara Reddy, 2008. "An Alternative approach to measure HDI," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2008-001, Indira Gandhi Institute of Development Research, Mumbai, India.
    6. Shoutir Kishore Chatterjee, 2005. "Measurement of Human Development: an alternative approach," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 6(1), pages 31-44.
    7. 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.
    8. Elizabeth Stanton, 2007. "The Human Development Index: A History," Working Papers wp127, Political Economy Research Institute, University of Massachusetts at Amherst.
    9. Hicks, Norman & Streeten, Paul, 1979. "Indicators of development: The search for a basic needs yardstick," World Development, Elsevier, vol. 7(6), pages 567-580, June.
    10. Mishra, SK, 2008. "On construction of robust composite indices by linear aggregation," MPRA Paper 9232, University Library of Munich, Germany.
    11. José-María Montero & Coro Chasco & Beatriz Larraz, 2010. "Building an environmental quality index for a big city: a spatial interpolation approach combined with a distance indicator," Journal of Geographical Systems, Springer, vol. 12(4), pages 435-459, December.
    12. Dong, Fengxia & Jensen, Helen H., 2011. "Measuring Food Safety Control in U.S. Hog Farms Using a Composite Indicator," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103863, Agricultural and Applied Economics Association.
    13. 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.
    14. Alexander Cotte Poveda, 2012. "Estimating Effectiveness of the Control of Violence and Socioeconomic Development in Colombia: An Application of Dynamic Data Envelopment Analysis and Data Panel Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 105(3), pages 343-366, February.
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    16. Herrero Carmen & Martínez Rico Ricardo & Villar Notario Antonio, 2008. "A Multiplicative Human Development Index," Working Papers 201099, Fundacion BBVA / BBVA Foundation.
    17. Mishra, SK, 2012. "A maximum entropy perspective of Pena’s synthetic indicators," MPRA Paper 37797, University Library of Munich, Germany.
    18. Vicente Royuela & Jordi Suriñach & Mónica Reyes, 2003. "Measuring Quality of Life in Small Areas Over Different Periods of Time," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 64(1), pages 51-74, October.
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    Cited by:

    1. Nayak, Purusottam & Mishra, SK, 2014. "A state level analysis of the status of social sector in India," MPRA Paper 58144, University Library of Munich, Germany.
    2. Ivaldi, Enrico & Bonatti, Guido & Soliani, Riccardo, 2016. "Is there a two-speed europe also in the well-being? - Esiste un’Europa a due velocità anche nel benessere ?," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 69(1), pages 45-68.
    3. Mishra, SK, 2012. "Construction of Pena’s DP2-based ordinal synthetic indicator when partial indicators are rank scores," MPRA Paper 39088, University Library of Munich, Germany.
    4. Prada, Albino & Sanchez-Fernandez, Patricio, 2014. "Del concepto de crecimiento económico al de desarrollo y bienestar de las naciones: Una aplicación a la Unión Europea
      [From economic growth to development and welfare of nations: An application to
      ," MPRA Paper 54764, University Library of Munich, Germany.
    5. repec:seg:012016:v:2:y:2017:i:3:p:107-122 is not listed on IDEAS
    6. repec:spr:soinre:v:132:y:2017:i:2:d:10.1007_s11205-016-1303-8 is not listed on IDEAS

    More about this item

    Keywords

    Human development index; Pena DP2 method; efficiency of composite index;

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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