Human Development Index (HDI) Explained
The Human Development Index (HDI) is a composite statistic of life expectancy, education, and per capita income indicators, which are used to rank countries into four tiers of human development. It was created by economist Mahbub ul Haq and was further developed by economist Amartya Sen.
Components of HDI
- Life Expectancy: This component measures the average number of years a person is expected to live at birth. It reflects the quality of healthcare and the overall health of a population.
- Education: This component measures two indicators: years of schooling and expected years of schooling. Years of schooling refer to the number of years a person has received formal education, while expected years of schooling refer to the number of years a child of school entrance age is expected to receive education in the future.
- Per Capita Income: This component measures the average income of a country's citizens. It reflects the standard of living and economic development of a country.
Calculation of HDI
The HDI is calculated by taking the geometric mean of the three components mentioned above:
HDI = (life expectancy index) x (education index) x (income index)
The life expectancy index and education index are calculated using the following formulas:
Life Expectancy Index = (life expectancy - 20) / (85 - 20)
Education Index = (2/3) x [(mean years of schooling / 15) + (expected years of schooling / 18)]
The income index is calculated as the natural logarithm of gross domestic product (GDP) per capita adjusted by purchasing power parity (PPP) divided by a predetermined reference value. The reference value is $100 for countries with the lowest human development, and $75,000 for countries with the highest human development.
Tiers of HDI
Based on their HDI scores, countries are classified into four tiers of human development:
- Very high human development: Countries with an HDI score greater than or equal to 0.8.
- High human development: Countries with an HDI score greater than or equal to 0.7 and less than 0.8.
- Medium human development: Countries with an HDI score greater than or equal to 0.55 and less than 0.7.
- Low human development: Countries with an HDI score less than 0.55.
The HDI is an important tool for measuring human development and guiding policy decisions. It helps identify areas that need improvement and track progress over time. However, it is important to note that the HDI has its limitations and should be used in conjunction with other indicators to get a more comprehensive picture of human development in a country.