What is Human Development Index (HDI)?
History:
- shows a country’s average performance
in three important areas of human
development: Living a long and healthy
life, Having access to education, and
Having an acceptable standard of living
- The HDI highlight that instead of
relying solely on economic growth to
gauge a nation’s development,
consideration should be given to its
citizens and their potential.
- HDI is one of the greatest instruments
for monitoring a nation’s level of
progress, as it can incorporate key social
and economic factors that influence
economic growth despite its limitations.
- The HDI can be used to question national
policy choices, asking how two countries
with the same level of GNI per capita can
end up with different human
development outcomes. These contrasts
can stimulate debate about government
policy priorities.
- The HDI simplifies and captures only
part of what human development entails.
It does not reflect on inequalities,
poverty, human security, empowerment,
etc. The HDRO provides other composite
indices as broader proxy on some of the
key issues of human development,
inequality, gender disparity and poverty.
In 1990, the United Nations Development
Programme (UNDP) published its first Human
Development Report (HDR). The Pakistani
Economist Mahbub Ul Haq and the Indian Nobel
laureate Amartya Sen introduced the first HDR in
1990. The Pakistani economist, Mahbub ul Haq’s
approach to human development was grounded in
Amartya Sen’s research on human capabilities.
The HDI calculates a ;minimum and maximum
value for each dimension referred to as
“goalposts” and then displays where each nation
sits regarding these goals. The value of the index
is calculated for each dimension on a scale from
0 to 1, with 0 denoting the least value and 1
denoting the highest value allocated to the
associated indicator. A country’s HDI value
increases with its level of human development.
HOW TO CALCULATE HDI:
Data sources
• Life expectancy at birth: UNDESA (2022).
• Expected years of schooling: CEDLAS and
World Bank (2023), ICF Macro Demographic
and Health Surveys (various years), UNESCO
Institute for Statistics (2023) and United Nations
Children’s Fund (UNICEF) Multiple Indicator
Cluster Surveys (various years).
• Mean years of schooling: Barro and Lee
(2018), ICF Macro Demographic and Health
Surveys (various years), OECD (2023),
UNESCO Institute for Statistics (2023) and
UNICEF Multiple Indicator Cluster Surveys
(various years).
• GNI per capita: IMF (2023) and UNDESA
(2023).
• United Nations Statistics Division (2023) and
World Bank (2023).
The HDI is the geometric mean of normalized
indices for each of the three dimensions.
Steps to calculate Human Development
Index values
There are two steps to calculating HDI
values.
Step 1: Creating the dimension indices
Minimum and maximum values (goalposts)
are set to transform the indicators expressed
in different units into indices between 0 and
1. These goalposts act as “the natural zeros”
and “aspirational targets,” respectively, from
which component indicators are
standardized. They are set at the following
values:
The justification for placing the natural zero
for life expectancy at birth at 20 years is
based on historical evidence that no country
in the 20th century had a life expectancy at
birth of less than 20 years (Maddison 2010;
Oeppen and Vaupel 2002; Riley 2005). Maximum life
expectancy at birth is set at 85, a realistic
aspirational target for many countries over
the last 30 years. Due to constantly improving
living conditions and medical advances, life
expectancy at birth in several economies
already exceeded or came very close to 85
years in 2022: 86.9 years in Monaco and 84.
8 years in Japan.
Societies can subsist without formal
education, justifying the education
minimum of 0 years. The maximum for
expected years of schooling, 18, is equivalent
to achieving a master’s degree in most
countries. The maximum for mean years of
schooling, 15, is the projected maximum of
this indicator for 2025.
The low minimum value for gross national
income (GNI) per capita, $100, is justified
by the considerable amount of unmeasured
subsistence and nonmarket production in
economies close to the minimum, which is
not captured in the official data. The
maximum is set at $75,000 per capita so that
additional income above the maximum does
not directly contribute to a country’s HDI
value or improve its ranking. Only five
countries (Liechtenstein, Qatar, Singapore,
Ireland and Luxembourg) exceeded the
$75,000 income per capita ceiling in 2022.
Having defined the minimum and maximum
values, the dimension indices are calculated
as:
Step 2. Aggregating the dimensional Step4: Then Divide to 0.000070271
indices The HDI is the geometric mean of the
three dimensional indices: Step5: Round to 2 decimal places.

HDI = 1/3 (health) + 1/3 (education) + 1/3 (income)

___________________________________ Follow Along with your calculator:

Example: Nigeria (2022 HDI) Step1: 4,755

Step2: 1.00025842424

Step3: 0.00025842424

Step4: 3.67753753326

Step 5: 3.68

Income Index:

In(4755)-In(100)
In(75,000)-In(100)

3.68-2.00 / 4.88-2.00

HDI = 1/3 (0.517) + 1/3 (0.545) + 1/3 (0.583) = 0.583 or 0.58

HDI = 0.548 = Low Human Development Note: The ff. then is constant since it is embedded
in the formula

log for 100 = 2.00

log for 75,000 = 4.88

Log Calculation using basic calculator:

Step1: Enter number you want to get the log.

Step2: Then press √ symbol of the calculator 15

times.

Step3: Then minus 1