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Measuring Human Development: A Stochastic Dominance Approach

  • Mehmet Pinar

    ()

    (University of Guelph, Canada)

  • Thanasis Stengos

    ()

    (University of Guelph, Canada)

  • Nikolas Topaloglou

    ()

    (Athens University of Economics and Business, Greece)

We consider a weighting scheme that yields the best-case scenario measurement of the Human Development Index (HDI) using an approach that relies on consistent tests for stochastic dominance efficiency (SDE). We compare a given hybrid composite index such as the official equally-weighted HDI to all possible indices constructed from a set of individual components to obtain the most optimistic scenario for development. In the best-case scenario index education is weighted considerably more than the other two components, per capita income and life expectancy, relative to the weight that it gets in the official equally-weighted index. We find that the best-case scenario hybrid index leads to a marked improvement of measured development over time when compared with the official equally-weighted HDI.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 42_12.

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Date of creation: Jun 2012
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Handle: RePEc:rim:rimwps:42_12
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