Question

The World Bank and United Nations often use the Human Development Index as a measure of economic performance. This is a number constructed using the Gross Domestic Product Per Capita, the literacy rate (as a measure of education in society) and the life expectancy (as a measure of the health of people in a society).

This is a better measure of country performance, especially in countries with high levels of income inequality. Explain how this is a construct and likely to better reflection of economic performance.

Answer 1

Gdp is tell us about monetary value of final produce by factor of production and what's their income genereted It is generally talking about average income increase in people income But this is not show quality of income, employment, health, education, basic facility etc situation. Gdp is just a quantity measures not quality as it not say anything about inequality prevail in between people.

hdi is more holistic which explains both the quality and quantity of development, that is, on the one hand under hdi, how much output has been produced and how many jobs, people are getting health, education, health facilities etc. and their The standard of living is improving, it tells all these, so through HDI, both qualitative and quantitative development is shown on one side and income inclusivity is also shown. Hence policy formation or program making is based on HDI now a days at each level, it may be national or international by workd bank, undp etc.