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Maximizing Human Development


  • Merwan Engineer

    (University of Victoria, Canada)

  • Ian King

    (The University of Melbourne, Australia)


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. Maximization of the HDI leads to consumption (excluding education and health expenditures) being pushed to minimal levels. It also leads to the overaccumulation of education and/or health capital and possibly physical capital, relative to the standard golden rule. We propose an alternative specification of the HDI, where permanent consumption replaces income as the proxy for a decent standard of living. Maximization of this alternative index yields a "human development golden rule" which balances consumption, education and health expenditure in promoting human development. We also advocate the method of optimization subject to constraints for revealing the consequences of taking a policy measure seriously and testing its congruence with its underlying philosophy.

Suggested Citation

  • Merwan Engineer & Ian King, 2012. "Maximizing Human Development," Working Paper series 30_12, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:30_12

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    References listed on IDEAS

    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Charles I. Jones & Peter J. Klenow, 2016. "Beyond GDP? Welfare across Countries and Time," American Economic Review, American Economic Association, vol. 106(9), pages 2426-2457, September.
    3. Krishna Mazumdar, 2003. "A New Approach to Human Development Index," Review of Social Economy, Taylor & Francis Journals, vol. 61(4), pages 535-549.
    4. Green, Jerry R & Stokey, Nancy L, 1983. "A Comparison of Tournaments and Contracts," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 349-364, June.
    5. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151, May.
    6. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    7. Merwan Engineer & Ian King & Nilanjana Roy, 2008. "The human development index as a criterion for optimal planning," Indian Growth and Development Review, Emerald Group Publishing, vol. 1(2), pages 172-192, September.
    8. King, Ian & Ferguson, Don, 1993. "Dynamic inefficiency, endogenous growth, and Ponzi games," Journal of Monetary Economics, Elsevier, vol. 32(1), pages 79-104, August.
    9. Lars Osberg & Andrew Sharpe, 2005. "How Should We Measure The "Economic" Aspects Of Well-Being?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(2), pages 311-336, June.
    10. Rivera, Berta & Currais, Luis, 1999. "Income Variation and Health Expenditure: Evidence for OECD Countries," Review of Development Economics, Wiley Blackwell, vol. 3(3), pages 258-267, October.
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    Cited by:

    1. 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.

    More about this item


    Economic growth; Human Development Index; Planning;

    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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