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APPENDIX A – THE HUMAN DEVELOPMENT INDEX

While the Human Development Index has changed in some ways over the years since its original introduction, the Human Development Report 2006 (UNDP, 2006, p. 394) provides the following technical description:

The HDI is a summary measure of human development.  It measures the average achievements in a country in three basic dimensions of human development:

A long and healthy life, as measured by life expectancy at birth.

Knowledge, as measured by the adult literacy rate (with two-thirds weight) and the combined primary, secondary and tertiary gross enrollment ratio (with one-third weight). [The “gross enrollment ratio” is the number of persons enrolled in school, regardless of age, divided by the total number of people in the relevant age group.]

A decent standard of living, as measured by GDP per capita in purchasing power parity (PPP) terms in US dollars.  

Before the HDI itself is calculated, an index needs to be created for each of these dimensions.  To calculate these indices – the life expectancy, knowledge, and GDP indices – minimum and maximum values (goalposts) are chose for each underlying indicator.

Performance in each dimension is expressed as a value between 0 and 1 by applying the following general formula:

Dimensions index = (actual value – minimum value)/(maximum value – minimum value)

The HDI is then calculated as a simple average of the dimension indices.

Goalposts for calculating the HDI:

    Maximum  Minimum

Indicator             value         value     

Live expectancy at birth (years)     85  25

Adult literacy (%)    100    0

Combined gross enrollment ratio (%)    100    0

GDP per capita (PPP US$)  40,000100         

N.B.: The GDP index is calculated using adjusted GDP per capita (PPP US$).  In the HDI income serves as a surrogate for all the dimensions of human development not reflected in a long and healthy life and in knowledge.  Income is adjusted because achieving a respectable level of human development does not require unlimited income.  Accordingly, the logarithm of income is used.

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