Measuring human development

By Matt Burdett, 12 March 2018

On this page, we look at the validity and reliability of development indicators and indices, including the human development index (HDI) and gender inequality index (GII).

  • The view from The Peak, Hong Kong: Hong Kong comes high on some indicators such as wealth and infrastructure, but very low on others such as happiness and affordable housing, so how ‘developed’ is it?

Types of development indicator

A development indicator is anything that is measured in order to determine the level of human development in an area. They are usually measured at the national scale, but can be used at any scale.

Many development indicators are ‘single component’ meaning they measure just one thing. An example is the crude birth rate: it only measures the number of children being born per 1000 people per year. In general, single component indicators they are relatively easy to measure and easy to understand. However, they are too narrowly focused to draw any overall conclusions about development.

Multiple component indicators are those that measure more than one thing and put them together to give an overall impression. The most famous multiple component indicator is the Human Development Index. It measures health, education and wealth to give an overall idea of the level of development. Multiple component indicators are often given as a percentage or ratio (the HDI is given on a scale of 0 to 1, 1 being the best) making them easy to understand. However, the apparent simplicity of the final number is often hiding a very complicated calculation which can include controversial decisions about what to include and how much weighting each variable is given.

Comparing indicators: an important note about currency

When we compare different development indicators, we often find that we are making comparisons between different countries that have very different backgrounds.

One major difference is the cost of basic products in different countries. The cost of a loaf of bread in one country will be different to another country. For example, products in Hong Kong are often relatively expensive compared to other countries, because of high property rents and the cost of importing products.

To make the cost comparable, we use PPP$, or Purchasing Power Parity in US dollars. This means that the sticker price (the price on the label) of a selection of products in each country is calculated, then adjusted to be the same as all the other countries. It means that the cost of your purchases will now be the same, so you can compare the real cost in different countries.

The table below shows the PPP for selected countries. Essentially, the higher the value, the more you can buy in that country with US$1. So, in India, you can buy much more with the same US$1, which tells you that product are cheaper. Notice that the US dollar remains constant, as every currency in the world is compared to it.

  • Purchasing Power Parities for selected countries. Source: OECD, 2018.

This is important because on face value, the Indian people earn a lot less than in other countries. But, they can buy a lot more with that money. Using PPP is a way to reduce the impact of converting currencies on the statistics that are used by Geographers.

Single component indicators

Economic indicators

Economic indicators are generally very important as they can control the amount of development in other areas such as social and environmental. For example, a social indicator such as healthcare is mainly of a high standard because the country spends a lot of money on it, so economic development can, in effect, dictate the social outcomes.

However, economic indicators are rather blunt. Just because a country is rich doesn’t mean that it has gender equality, or an adequate supply of basic need for the entire population. Economic inequality can mean that other types of development are actually quite low even when the economic indicator is strong.

Development indicator

Definition or more detail

Benefits of this indicator

Problems with this indicator

GNP

Gross National Product. The total value of goods and services for consumption within a country plus income from foreign investments.

Quantitative measure makes it easy to compare countries.

Figures are fixed for the year so cancel out seasonal fluctuations (e.g. the problem of the south having the opposite harvest times to the north).

Easy to assess the growth of a country’s economy.

Very difficult to obtain accurate information about the total economy.

Some products have no monetary value e.g. subsistence agriculture does not count.

Given in US$ so problem of currency conversion.

Does not say anything about quality of life in the country.

Could be distributed unevenly within a country.

GDP

Gross Domestic Product. The total monetary value of all goods and services produced by a country during a year except any income from foreign investments.

As GNP above.

As GNP above.

GNI

Gross National Income. The total value of goods and services produced within a country together with the balance of income and payments from or to other countries.

As GNP above.

As GNP above, plus MICs (e.g. China and Brazil) might have high levels because they earn more from exports, so the balance of payments is often positive. However, their GDP is relatively low so this is a complicated figure to use.

PPP

Purchasing Power Parity. Usually measured in US dollars. It is added to GNI, GNP or GDP to allow easy comparison between countries in real terms.

Adjusts the GNI (or other economic measurement) to take account of the different costs for products in different countries, e.g. fruit and vegetables cost more from a supermarket in an HIC compared to a market in an LIC. It makes it easier to compare countries.

Always measured in US dollars, so temporary fluctuations in the exchange rate can affect the annual figures.

Social indicators

Social indicators are about issues such as healthcare, education, demographics and food. They have a direct impact on a person’s well being – more than simple economics. They tend to focus on the basic needs of people and by expressing them as a ratio of the total population they can be easier to understand than economic indicators.

Development indicator

Definition or more detail

Benefits of this indicator

Problems with this indicator

Infant Mortality Rate

The number of deaths of infants under 1 year old in a given year per 1000 live births in the same year

Most deaths in areas with high IMR are preventable and linked to water supply, sanitation, housing, nutrition and basic healthcare, so it’s easy to identify ways to tackle it.

Some countries may focus on infant mortality at the expense of healthcare for other age groups.

Adult literacy

% of total population who can read and write

These all link directly into the concept of quality of life (a person’s general feeling of well being, satisfaction and happiness).

Information is revealed about the general living standards of the country rather than a simple average of income.

Does not take into account other skills and oral traditions.

Life expectancy at birth

Average number of years a baby is expected to live from the year of birth

As adult literacy above.

Does not take into account a country’s history, instead basing figures on current events. Also does not include potential future issues such as major diseases.

Number of doctors per 100,000 people

Linked to economy at the lowest levels but standards vary in other ways such as the quality of healthcare or ‘phone connection. (See malnutrition work.)

As adult literacy above.

Does not reflect possible differences in the locations of the doctors (e.g. rural or urban) or the specific number to different groups in society.

Telephone landlines per 1000 people

As number of doctors above.

As adult literacy above.

In large land areas, low populations may not have fixed line telephones and use mobile phones instead – this is especially the case in Africa.

Total calories per day

As number of doctors above.

As adult literacy above.

Malnutrition through obesity is not measured here.

Multiple component indicators

Multiple component indicators are complex because they use formulas to determine an overall level of development, but the formula is a subject decision about what to include. The most important multiple component indicator is the Human Development Index, which has been part of the United Nations Development Programme’s annual Human Development Report since 1990. In 2010 the way the index was calculated was changed. The table below shows the method used since then.

There are several gender-related indexes in the table. This is because gender disparity is a multidimensional issue, with economic, social and political aspects.

Development indicator

Definition or more detail

Benefits of this indicator

Problems with this indicator

Human Development Index

Includes economic (GNI per capita (PPP US$)), education (Mean years of schooling and Expected years of schooling) and health (life expectancy at birth). Value between 0 and 1 (1 = higher development). Generally relates to economic status of the country but can show large differences between similarly wealthy countries.

Includes human development, leading to a greater and more sustainable economic growth.

Difficult formula to apply.

Some data not available for lots of countries.

Can mask poverty in some less economically developed parts of the world.

Human Poverty Index

Split into HPI1 (LIC/MICs) and HPI2 (HICs). % of people dead by 40, illiterate, without safe water, without healthcare, and malnourished children. Focuses on the extent of deprivation, so some high income countries with an underclass come out badly.

Highlights countries who have a poor record on reducing extreme poverty in their own countries.

Difficult formula to apply.

Can show problems existing despite a generally well off population.

Gender Development Index

Introduced in 1995. HDI adjusted downward for gender inequality, including male and female share of earned income. Must be used alongside HDI information.

Highlights countries who have a poor record on reducing discrimination in their own countries. It indicates the marginalisation of women.

Does not take account of different religions etc. – very Western view of the world.

There were only very small differences between this and HDI, leading to accusations that gender was unimportant.

Gender Empowerment Measure

Introduced in 1995. Whether women take an active part in economic and political life. Includes % of parliamentary seats, managers, professional workers and share of earned income, by women.

Highlights countries who have a good record encouraging and allowing women to engage in the political and economic processes in their own countries. It indicates the marginalisation of women.

Does not take account of different religions etc. – very Western view of the world.

Has been accused of being elitist by only measuring gender equality amongst powerful people.

Gender Inequality Index (GII)

Introduced in 2010 and intended to replace the GDI and GEM. Includes health, empowerment and employment [labour market] indicators.

Ignores controversial issues that were included in GDI and GEM such as income disparities. The formula prevents one indicator showing positive development from outweighing an indicator of negative development.

Complex formula; uses five different indicators spread across three development issues.


Sources

OECD, 2018. Purchasing power parities (PPP) (indicator). doi: 10.1787/1290ee5a-en https://data.oecd.org/conversion/purchasing-power-parities-ppp.htm Accessed on 21 March 2018.


Measuring human development: Learning activities

Questions

  1. Define ‘development’. [2]
  2. Distinguish between single- and multiple-component indicators of development. [2]
  3. Outline the elements that make up GNI and GDP. [2]
  4. Suggest why Gross National Income is often used to measure the wealth of a country over the more well-known Gross Domestic Product. [3]
  5. Economic indicators such as GDP, GNP and GNI are often given as ‘per capita’ values. Suggest why this is the case. [2]
  6. What does ‘PPP’ stand for? [1]
  7. Economic indicators such as GNI per capita are often given as ‘GNI pc PPP’. Explain why it is important to use PPP figures. [3]
  8. Explain why there is often a correlation between economic and social indicators of development. [3]
  9. Explain one strength and one weakness of using the number of doctor per 100,000 people as a measure of social development. [4]
  10. Briefly describe the features of the Human Development Index. [3]
  11. Explain one strength and one weakness of the HDI as a measure of overall development. [4]
  12. Explain one strength and one weakness of the Gender Inequality Index as a measure of overall development. [4]

Other tasks

Make a copy of this table and use these statements to complete it. Check your answers using this answer key. (This activity takes between 30-50 minutes.)


© Matthew Burdett, 2018. All rights reserved.

All secondary material on this site is clearly referenced and may be subject to copyright restrictions by the original authors. All original material on this page is subject to copyright.

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