Development Indicators

HDI - Human Development Index

The HDI – human development index – is a summary composite index that measures a country's average achievements in three basic aspects of human development: health, knowledge, and a decent standard of living. Health is measured by life expectancy at birth; knowledge is measured by a combination of the adult literacy rate and the combined primary, secondary, and tertiary gross enrolment ratio; and standard of living by GDP per capita (PPP US$).

The breakthrough for the HDI was the creation of a single statistic which was to serve as a frame of reference for both social and economic development. The HDI sets a minimum and a maximum for each dimension, called goalposts, and then shows where each country stands in relation to these goalposts, expressed as a value between 0 and 1.

The educational component of the HDI is comprised of adult literacy rates and the combined gross enrolment ratio for primary, secondary and tertiary schooling, weighted to give adult literacy more significance in the statistic. Since the minimum adult literacy rate is 0% and the maximum is 100%, the literacy component of knowledge for a country where the literacy rate is 75% would be 0.75, the statistic for combined gross enrolment is calculated in a analogous manner.

The life expectancy component of the HDI is calculated using a minimum value for life expectancy of 25 years and maximum value of 85 years, so the longevity component for a country where life expectancy is 55 years would be 0.5.

For the wealth component, the goalpost for minimum income is $100 (PPP) and the maximum is $40,000 (PPP). The HDI uses the logarithm of income, to reflect the diminishing importance of income with increasing GDP. The scores for the three HDI components are then averaged in an overall index.

The HDI facilitates instructive comparisons of the experiences within and between different countries. For details on how to calculate the HDI, see Technical note 1 HDR 2007/2008 [5 680 KB]and also the interactive HDI calculator and the Excel tool Calculating the indices [61 KB] - interactive tools that help understand the calculation of the HDI.

How is the HDI used?

1. To capture the attention of policy makers, media and NGOs and to draw their attention away from the more usual economic statistics to focus instead on human outcomes. The HDI was created to re-emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth.

2. To question national policy choices - asking how two countries with the same level of income per person can end up with such different human development outcomes (HDI levels). For example, Swaziland and Sri Lanka have similar levels of income per person, but life expectancy and literacy differ greatly between the two countries, with Sri Lanka having a much higher HDI value than Swaziland. These striking contrasts immediately stimulate debate on government policies on health and education, asking why what is achieved in one country is far from the reach of another.

3. To highlight wide differences within countries, between provinces or states, across gender, ethnicity, and other socioeconomic groupings. Highlighting internal disparities along these lines has raised national debate in many countries.

GDI - Gender-related Development Index (the HDI adjusted for gender inequality)

Gender-related Development Index (GDI), measures achievement in the same basic capabilities as the HDI does, but takes note of inequality in achievement between women and men. The methodology used imposes a penalty for inequality, such that the GDI falls when the achievement levels of both women and men in a country go down or when the disparity between their achievements increases. The greater the gender disparity in basic capabilities, the lower a country's GDI compared with its HDI. The GDI is simply the HDI discounted, or adjusted downwards, for gender inequality.

The two measures have been used as advocacy and monitoring tools for gender-related human development analysis and policy discussions. The review concluded that the indices have often been misinterpreted, particularly the GDI. The GDI is not a measure of gender inequality. It is the HDI adjusted for gender disparities in its basic components. To get a measure of gender inequality, one should use the difference or the ratio of two indicators. In addition, the difference between the HDI and the GDI tend to be small because those captured by the three dimensions tend to be small, giving a misleading impression that gender gaps are irrelevant. Due to the aversion to inequality formula used to calculate the GDI, gender disparities relating to employment and quality of education for example are not captured.

GEM - Gender Empowerment Measure (gender equality in economic and political participation and decision making)

The Gender Empowerment Measure (GEM) is a measure of agency. It evaluates progress in advancing women's standing in political and economic forums. It examines the extent to which women and men are able to actively participate in economic and political life and take part in decision-making. While the GDI focuses on expansion of capabilities, the GEM is concerned with the use of those capabilities to take advantage of the opportunities of life.

The GEM on the other hand measures political participation and decision making power, economic participation and command over resources. Its calculation mirrors that of the GDI (see : Technical note 1 HDR 2007/2008 [5 680 KB] for more details on calculating the GDI and the GEM). As a practical implication of the use of the estimated earned income used to measure economic participation a poor country cannot achieve a high value for the GEM and vice versa for rich countries. For more details on the workshop, see Readers guide and note to tables Reader's Guide HDR 2007/2008 [137 KB] and Klasen 2006 and Schuller 2006 (Read the article online).

In HDR 2006 the GDI and GEM methodologies are applied at the global level to rank 136 countries according to the GDI and 75 according to the GEM. The same methodologies can also be applied at the national and sub-national levels through disaggregated GDIs and GEMs so as to compare differences between regions, ethnic groups, age groups, etc.

Moreover, the methodology used to construct the GDI and GEM could be used to assess inequalities not only between men and women, but also between other groups such as rich and poor, young and old, etc.

HPI - Human Poverty Index (the level of human poverty)

If human development is about enlarging choices, poverty means that opportunities and choices most basic to human development are denied. Thus a person is not free to lead a long, healthy, and creative life and is denied access to a decent standard of living, freedom, dignity, self-respect and the respect of others. From a human development perspective, poverty means more than the lack of what is necessary for material well-being.

For policy-makers, the poverty of choices and opportunities is often more relevant than the poverty of income. The poverty of choices focuses on the causes of poverty and leads directly to strategies of empowerment and other actions to enhance opportunities for everyone. Recognizing the poverty of choices and opportunities implies that poverty must be addressed in all its dimensions, not income alone.

The three indicators of the human poverty index (HPI)

Rather than measure poverty by income, the HPI uses indicators of the most basic dimensions of deprivation: a short life, lack of basic education and lack of access to public and private resources. The HPI concentrates on the deprivation in the three essential elements of human life already reflected in the HDI: longevity, knowledge and a decent standard of living. The HPI is derived separately for developing countries (HPI-1) and a group of select high-income OECD countries (HPI-2) to better reflect socio-economic differences and also the widely different measures of deprivation in the two groups.

The first deprivation relates to survival: the likeliness of death at a relatively early age and is represented by the probability of not surviving to ages 40 and 60 respectively for the HPI-1 and HPI-2.
The second dimension relates to knowledge: being excluded from the world of reading and communication and is measured by the percentage of adults who are illiterate.
The third aspect relates to a decent standard of living, in particular, overall economic provisioning.

For the HPI-1, it is measured by the unweighted average of the percentage of the population without access to safe water and the percentage of underweight children for their age. For the HPI-2, the third dimension is measured by the percentage of the population below the income poverty line (50% of median household disposable income).

In addition to the three indicators mentioned above, the HPI-2 also includes social exclusion, which is The fourth dimension of the HPI-2 . It is represented by the rate of long term unemployment. See: Technical note 1 HDR 2007/2008 [5 680 KB] of Human Development Report 2007/2008 for more details on the computation of the HPI.