Question

Please answer at least in 300 words. Please do NOT copy and paste from another source.

Discuss the differences between the traditional HDI in comparison to the “new” (NHDI) formulation. In what ways do you think either one is a better measure of human development?

Answer 1

Answer) Human Development Index (HDI) shows the development and qualitative aspect of growth. It was constructed by Dr Amartya Sen and Dr mehboob ul Haq. HDI is based upon three parameters namely: life expectancy; education; and per capita income.

In the recent times, the computation of HDI has been modified. The old HDI consist of :

1. Life expectancy at Birth
2. Gross national per capita income in purchasing power parity of $.
3. Education index: 2/3 weight was given to adult literacy rate and 1/3 weight was given to gross enrollment ratio.

HDI= (Life expectancy+ Per capita income+ education Index)/3

Post 2010, a new method has been devised and minor modification has been made to the existing parameters. Such as:

1. Life expectancy at birth.
2. Gross national per capita income in purchasing power parity of $.
3. Education index: which is the average of expected years of schooling and average year of school.

HDI= (life expectancy x per capita income x education index)^1/3

The new HDI is based upon geometric mean which depicts clear results. This formula is also able to overcome the issue of substitution of one parameter with the other. For instance if education index has zero score, then the old HDI would have some value. But zero education makes an individual a burden on the society and a financial drain on the tax payers money.

Since the new HDI is based upon geometric mean, if a zero education index exist. Then the overall HDI becomes zero. This depicts that there is some complementary power among the parameters.