I. Human Development: The Concept
II. The Human Development Index (HDI)
III. The Human Poverty Index (HPI)The disaggregated HDI Country specific-HDIs Highlighting uneven development: comparing relative levels of HDI and per capita income
IV. Public expenditure and aid ratios
V.Measuring inequality: Gender-related Development Index
(GDI) and Gender Empowerment
Measure (GEM)
The Human Development Reports (HDRs) present analytical tools for policy choice. These are some of the most significant contributions of the HDRs. They provide user friendly methods for the analysis of human development at the international, national and sub-national levels - means for assessing HD situations, trends and gaps.
For policy makers and development practitioners, analytical tools introduced in the HDRs have the advantage of being simple requiring basic statistical data and mathematical knowledge. They are readily understandable by non-specialists and facilitate stark findings that attract support for human development and help decision-makers determine priorities and formulate HD-related policies.
In the global HDRs these tools are generally applied at the international level. Subject to the availability of data, they are also applicable at the national and sub-national levels. The latter, include: regional, urban/rural, male/female, age-group, income level, ethnic group, etc.
This paper briefly presents the analytical tools developed in the Human Development Reports since their inception in 1990 and describes their potential uses in national settings.
I. Human Development: The Concept
The concept of human development focuses on the ends rather than the means of 'development' and progress. The real objective of development should be to create an enabling environment for people to enjoy long, healthy and creative lives." Though this may appear to be a simple truth, it is often forgotten in the immediate concern with the accumulation of commodities and wealth.
Human development denotes both the process of widening people's choices and the level of their achieved well-being. The most critical ones are to lead a long and healthy life, to be educated, and to enjoy a decent standard of living. Additional choices include political freedom, guaranteed human rights and self respect. The concept distinguishes between two sides of human development. One is the formation of human capabilities, such as improved health or knowledge. The other is the use that people make of their acquired capabilities, for work or leisure.
The concept of human development has often been misconstrued and confused with the following concepts and approaches to development.
II. The Human Development Index (HDI)
The first Human Development Report (1990) introduced a new way of measuring development — by combining indicators of life expectancy, educational attainment and income into a composite human development index, the HDI (box 1). The breakthrough for the HDI was to find a common measuring rod for the socio-economic distance travelled. The HDI sets a minimum and a maximum for each dimension and then shows where each country stands in relation to these scales —expressed as a value between 0 and 1. 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. Similarly, the minimum for life expectancy is 25 years and the maximum 85 years, so the longevity component for a country where life expectancy is 55 years would be 0.5. For income the minimum is $100 (PPP) and the maximum is $40,000 (PPP). Income above the average world income is adjusted using a progressively higher discount rate. The scores for the three dimensions are then averaged in an overall index.
The HDI facilitates the determination of priorities for policy intervention
and the evaluation of progress over time. It also permits instructive comparisons
of the experiences within and between different countries.
The disaggregated HDI
One way the use of the human development index has been improved is through disaggregation. A country's overall index can conceal the fact that different groups within the country have very different levels of human development. Disaggregated HDIs are arrived at by using the data for the HDI components pertaining to each of the groups into which the HDI is disaggregated, treating each group as if it were a separate country. Such groups may be defined relative to geographical or administrative regions, urban-rural residence, gender and ethnicity.
Using disaggregated HDIs at the national and sub-national levels helps highlight the significant disparities and gaps: among regions, between the sexes, between urban and rural areas and among ethnic groups. The analysis made possible by the use of the disaggregated HDIs should help guide policy and action to address gaps and inequalities. For example, it can help restructure public expenditure (or aid allocations) to regions and/or groups with low HDI ranking.
Disparities may already be well known, but the HDI can reveal them even more starkly. The disaggregation prepared for the 1993 Report on the differences in living conditions in the United States among Blacks, Hispanics and Whites spurred a great deal of policy debate. Disaggregation by social group or region can also enable local community groups to press for more resources, making the HDI a tool for participatory development. It can also be used to hold local representatives accountable.
A study of Poland (Mijakowska 1993), for example, calculates HDIs for 49 administrative units. The indexes range from 0.739 to 0.916. Twenty one of them are at medium level and twenty eight of them at high HD. Weighing by population one may say that seventy four percent enjoy high HD and twenty six percent medium level of HD. Disaggregated HDIs have been used for analysis in other countries, including: Brazil, China, Colombia, Egypt, Gabon, Germany, India, Kazakhstan, Malaysia, Mexico, Nigeria, Papua New Guinea, Poland, South Africa, Trinidad and Tobago, Turkey, Ukraine and USA.
Country-specific HDIs
To reflect country-specific priorities and problems and to be more sensitive to a country's development level, the basic components of the HDI appearing in the global HDRs could be supplemented or replaced by other more relevant components. The same methodology used to construct the global HDI could be applied to a set of other components to construct country specific HDIs that both reflect national priorities and are more sensitive to policy changes. For example, unemployment could become a component of the national HDI in countries where it is considered as a priority problem.
Countries with a medium level of human development (say with an HDI between 0.800 and 0.500), could add one supplementary indicator for each of the three categories of basic variables. In the survival/longevity category, for example, we can add under-5 (i.e. infant and child mortality); in the education category we could add secondary school enrolment; and income category we add the incidence of income poverty in the country. For countries with a "high" level of human development (say with an HDI value greater than 0.800), we could add a further supplementary indicator to the two already existing for each category in the medium human development group. In the survival (longevity) category, we could add the maternal mortality rate; in the education category, we could add tertiary enrollment; and in the income category, we could add the Gini-corrected mean national income (i.e. per capita GDP multiplied by (1-G)).
It is difficult to use the HDI to monitor changes in human development in the short-term because two of its components, namely life expectancy and adult literacy change slowly. To address this limitation, components that are more sensitive to short-term changes could be added to the national HDI. For example, the rate of employment, the percent of population with access to health services, or the daily caloric intake as a percentage of recommended intake could be used as components in country specific HDIs. These are expected to be more sensitive to policy changes than life expectancy or adult literacy.
Every country should chose the HDI components that relate to its priorities. For example, CIS and Eastern European countries could choose the rate of employment to reflect the priorities arising from the economic transition they are undergoing. On the other hand, countries where food insecurity is a problem, such as many in Africa, could choose the daily caloric intake indicator as a component in the country specific HDI.
Thus, the usefulness and versatility of the HDI as an analytical tool for HD at the national and sub-national levels would be enhanced if countries choose components that reflect their priorities and problems and are sensitive to their development levels, rather than rigidly using the three components presented in the HDI of the global HDRs.
To be incorporated in the country specific HDI, the same methodology applied to the components of the global HDI could be applied to each of the selected indicators. For example, if the rate of employment is selected as a component in a national or a sub-national HDI, then its minimum and maximum values should be fixed for the country: say the maximum value would be 100% for full employment and the minimum value would be 0%. Then the rate of employment would be incorporated in the HDI as a value between 0 and 1. Since the minimum rate of employment is 0% and the maximum is 100%, the employment component for a country, region or group whose employment rate is 75% would be 0.75. The score for employment along with the scores of the other indicators incorporated in the country-specific HDI would be averaged in an overall index.
Highlighting uneven development: comparing relative levels of HDI and per capita income
National wealth might expand people's choices. But it might not. The use that nations make of their wealth, not the wealth itself, is decisive. And unless societies recognize that their real wealth is their people, an excessive obsession with the creation of material wealth can obscure the ultimate objective of enriching human lives.
True, countries with higher average incomes tend to have higher average life expectancies, lower rates of infant and child mortality and higher literacy rates—indeed, a higher human development index (HDI). But these associations are far from perfect. In intercountry comparisons, income variations tend to explain not much more than half the variation in life expectancy, or in infant and child mortality. And they explain an even smaller part of the differences in adult literacy rates.
Although there is a definite correlation between material wealth and human well-being, it breaks down in far too many societies. Many countries have a high GNP per capita, but low human development indicators and vice versa. Countries at similar levels of GNP per capita may have vastly different human development indicators, depending on the use they have made of their national wealth. The maximization of wealth and the enrichment of human lives need not move in the same direction.
The HDI offers an alternative to GNP for measuring the relative socio-economic progress at national and sub-national levels. Comparing HDI and per capita income ranks of countries, regions or ethnic groups within countries highlights the relationship between their material wealth and income on the one hand and their human development on the other. A negative gap implies the potential of redirecting resources to Human Development.
III. The Human Poverty Index (HPI)
If human development is about enlarging choices, poverty means that opportunities and choices most basic to human development are denied: to lead a long, healthy, creative life and to enjoy 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, for it 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 (box 2).
The Human Development Report 1997 introduced a human poverty index (HPI) in an attempt to bring together in a composite index the different features of deprivation in the quality of life to arrive at an aggregate judgement on the extent of poverty in a community. Human Development Report 1996 attempted this through a particular version of the capability poverty measure. The HPI pursues the same approach, focusing on a broader and more representative set of variables.
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 decent a living standard.
The first deprivation relates to survival: the vulnerability to death at a relatively early age and is represented in the HPI by the percentage of people expected to die before age 40.
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. This is represented by a composite of three variables: the percentage of people with access to health services and to safe water, and the percentage of malnourished children under five.
Technical note 1 and 2 of the Human Development Report 1997 (pp. 117-125)
explain the properties of the HPI and the method for computing it.
IV. Public expenditures and aid ratios
To analyze how public spending on human development can be designed and monitored, four ratios have been suggested in the Human Development Report 1991.
If public expenditure is already high (as in many developing countries), but the social allocation ratio is low the budget will need to be reassessed to see which areas of expenditure could be reduced. Military spending, debt servicing and loss-making public enterprises are often likely candidates.
If the first two ratios are high, but the ultimate human development impact, as reflected in human development indicators, is low the social priority ratio must be increased. For the poorest countries, this is likely to involve seeking a better balance between expensive curative hospitals and preventive primary health care, between universities and primary schools and between focusing greater attention on the cities and on the rural areas, where most poor people live.
In the 1991, the analysis of the human expenditure ratios for 25 countries, whose population added to 74% of the developing world, presented some interesting patterns. It illustrated how it is possible to arrive at similar expenditures on social priority areas, but from very different directions.
For example, Pakistan and Indonesia have a low human expenditure ratio, despite reasonable overall levels of public expenditure. The reason is that their social allocation and social priority ratios are low. The Republic of Korea, on the other hand, directs a large share of its relatively small public budget towards social priorities and has, as a result, a much better human expenditure ratio. Some countries with a high human expenditure ratio rely on large public expenditure ratios, while others have particularly high social priority ratios.
Some countries have moved beyond basic priorities. They may have only a moderate human expenditure ratio when the priorities considered are basic ones. But they already have achieved high levels of human development and can therefore shift their focus to supporting social services at the higher levels.
The human expenditure ratio should increasingly become one of the principal guides to public spending policy. When resources are tight, greater attention must be paid to allocation priorities and efficiency in spending. It is wrong, however, to confuse a plea for greater efficiency with indifference to the mobilization of additional resources. The best argument for mobilizing more resources is spending existing resources well.
Aid budgets, like government expenditures, can be examined through four ratios:
The Human Development Report 1995 introduced two new measures of human development that highlight the status of women (box 3). The first -- the "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 GDI thus, reflects gender imbalances in basic health, education and income.
The second measure - the "Gender Empowerment Measure (GEM)" - evaluates progress in advancing women at the political and economic level. It examines whether 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.
In the HDR 1997 the GDI and GEM methodologies are applied at the global level to rank 146 countries according to the GDI and 94 according to the GEM. The same methodologies can also be applied at the national and sub-national levels through disaggregated GDIs and GEMs that in a similar way as disaggregated HDIs 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 between other groups such as rich and poor, young and old, etc. It could be expanded to highlight inequalities not only between two groups but among several such as ethnic groups, regions, etc.
Moez Doraid
Human Development Report Office
Third Edition; August 1997