Research Question:

How HDI is majorly affected by life expectancy, expected year of schooling and gross national income?

Literature review
The human development index is the complex indicator used widely for comparing and assessing the
achieved levels of development of a particular country or region. It helps to identify that how socially
developed a country is. It mainly deals with three aspects of human development i.e., health, education
and standards of living. One needs to choose the variables wisely to that approach the achievement in
the measurements. Health and education both can be seen to be valuable in themselves. While the
standards of living can be enhanced by having more income. The HDI was acquaint with conventional
measures of economic development such as income per capita and the rate of economic growth.
Income per capita can enhance the people’s choice. It can be seen that country with higher income has
good health and have better educational achievements resulting in higher HDI. Consequently, the
manner in which income is distributed and spent within countries is decisive. Some countries may have
less education with higher level of income and low level of human development index. While on the
other hand, some countries may have different level of human development index with average income.

Moreover, a country having a higher income can have more life expectancy. As the person can get
better diet, health facilities and other medication. They can have access to safe and clean water which
results in the reduction of waterborne diseases. So the higher income also improves the overall health
of the persons. Thus improving the human development index of the country. Positive changes bring
better opportunities for people, increasing life expectancy, better schooling and better standards of
living. Whereasantagonistic changes create developmental issues.It is important to highlight that
development issues cannot be described only by economic indicators. To accomplish the goals of our
investigation, we have built a regression model where human development index is the dependent
model and the descriptive variables are health, education and standards of living.

In this manner, we found that the above indicators that are applied to evaluate the adequacy and
describing the degree of social and economic advancement based on information in the country and
regions of the world included in the index of the knowledge economy directly influence the main
principle of the HDI score. The human development index is based on information that are clearly
comparable across countries and times. Mortality information permit scientists to give a substantially
steadier image of development outlines at country levels,both geographically and historically.
Descriptive Statistics
Dependent Variable
The Human Development Index (HDI) provides a single index measure to capture three key dimensions
of human development: a long and healthy life, access to knowledge and a decent standard of living.
This project is about HDI (dependent variable) of countries and what factors affect it. The HDI is
calculated as the geometric mean (equally-weighted) of life expectancy, education, and GNI per capita.
The education dimension is the arithmetic mean of the two education indices (mean years of schooling
and expected years of schooling).

Independent Variable
The independent variables are following:
 Life expectancy at birth to assess a long and healthy life
 Expected years of schooling to assess access to knowledge of the young generation
 Mean years of schooling to assess access to knowledge of the older generation
 Gross national income (GNI) per capita to assess the standard of living
 GNI per capita rank minus HDI rank is difference in rankings by GNI per capita and by the HDI
and negative value means that the country is better ranked by GNI than by the HDI.
 Share of seats in parliament
 Annual growth of GDP per capita
 Unemployment as percent of labor force

Correlations
To test relationships between our variable we use correlation to identify whether our variables have
strong, moderate or weak relation.

Correlation of human development index with independent variables

The correlation of HDI with life expectancy, expected year of schooling and mean year of schooling is
0.908, 0.904, and 0.912 respectively i.e. high correlation, but gross national income is moderately
correlated by 0.762 and there is very weak relation of 0.149 of GNI per capita rank minus HDI rank.

Correlation between independent variables

The correlation of life expectancy has moderate relation with other independent variables except GNI
per capita minus HDI rank; which has weak relation of 0.264. Expected year of schooling has strong
relation of 0.808 with mean years of schooling; with gross national income and GNI per capita minus HDI
rank is moderate and weak respectively. Furthermore, mean years of schooling with gross national
income and GNI per capita minus HDI rank has moderate (0.620) and weak(0.330) relation , respectively.
Gross national income has negative and weak relation with GNI per capita minus HDI rank.
Regressions
Linear Regression
In our data HDI has highest correlation with life expectancy; hence HDI is regress on life expectancy for
our basic model.

HDI = 0.183(Life expectancy) – 0.616 + ϵ

One unit change in life expectancy will change HDI by 0.183. The R-squared value of our regression
model is 0.8247, which means that life expectancy can fully explain the change in HDI. This is also
proved through RSS value. This concludes that omitted variable biased is present in our model as other
independent variables also have relation with HDI and life expectancy as proved through correlation
matrix.

Multiple Regression
Multiple regression of all variables shows some insignificant variables i.e. share of seats in parliament,
Annual growth of GDP per capita and Unemployment as percent of labor force as there p value is
greater than 0.05. So, multiple regression based on remaining variables shows that one unit change in
life expectancy, expected years of schooling, mean years of schooling, gross national income and GNI
per capita minus HDI rank will change HDI by 0.007, 0.016, 0.021, 1.73 e−7, and -0.002, respectively.

HDI = 0.007(life expectancy) + 0.016(expected years of schooling) + 0.021(mean years of schooling) +

1.73e−7(gross national income) – 0.002(GNI per capita minus HDI rank) – 0.221+ϵ

It can be concluded that this model fully explain HDI as its RSS( unexplained part) is 0.028 which is very
low as compared to the value of our basic model (0.75).
https://www.researchgate.net/publication/233927023_A_Newer_Human_Development_Index

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