Human Development Index

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AMIT SHAH-ECONOMICS HOMEWORK- 08/10/14 HDI The Human Development Index (HDI) is a composite statistic of life expectancy, education, and income indices used to rank countries into four tiers of human development. The Human Development Index (HDI) forms part of the annual human development report and is a composite measure of economic and social welfare that has three main components. At its most basic the HDI focuses on longevity, basic education and minimal income and progress made by countries in improving these three outcomes. The inclusion of education and health indicators is a sign of successful government policies in providing access to important merit goods such as health care, sanitation and education. The three main components of HDI are: 1.Knowledge: First an educational component made up of two statistics – mean years of schooling and expected years of schooling 2.Long and healthy life: Second a life expectancy component is calculated using a minimum value for life expectancy of 25 years and maximum value of 85 years 3.A decent standard of living: The final element is gross national income (GNI) per capita adjusted to purchasing power parity standard (PPP) Problems with HDI 1) 2/3rds of the weight comes from the literacy rate. At least that's not ridiculous. But the other 1/3 comes from the Gross Enrollment Index - the fraction of the population enrolled in primary, secondary, or tertiary education. To max out your education score, you have to turn 100% of your population into students! 2) The HDI gives equal weights to three different outcomes, but bounding the results between 0 and 1 builds in a massive bias against GDP. GDP per capita has grown fantastically during the last two centuries, and will continue to do so. In reality, there's plenty of room left for further improvement even in rich countries. But the HDI

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