What is the Human Development Index (HDI)?

Question

BlackTom AI · Accepted Answer

The Human Development Index (HDI) is a composite measure combining three basic dimensions of human well‑being: health, education and standard of living.

1) Relevant knowledge points and concepts
- HDI was developed by the UNDP to go beyond GDP and capture broader human development.
- It uses three dimension indices: a health index (based on life expectancy), an education index (based on mean years of schooling and expected years of schooling), and an income index (based on GNI per capita, adjusted using a logarithm).
- The three indices are aggregated using the geometric mean to produce a value between 0 and 1 that ranks countries.

2) Step‑by‑step reasoning and construction
- Health dimension: Life expectancy index = (LE − 20) / (85 − 20), where LE is life expectancy at birth (20 and 85 are fixed goalposts).
- Education dimension: compute Mean Years of Schooling (MYS) index = MYS / 15, and Expected Years of Schooling (EYS) index = EYS / 18; then Education index = (MYS_index + EYS_index) / 2.
- Income dimension: Income index = [ln(GNI per capita) − ln(100)] / [ln(75,000) − ln(100)] (log transformation reflects diminishing returns of income to human development).
- Final HDI = (Health_index × Education_index × Income_index)^(1/3) (geometric mean).

3) Why answer (a) is correct
- Option (a) precisely describes the HDI’s components (life expectancy, education, per capita income) and its purpose (ranking countries by human development), matching the UNDP definition and methodology outlined above.

4) Why the other options are incorrect
- (b) refers to full employment achievement — that is an employment or labor market statistic, not the HDI.
- (c) suggests an alternative measure of quantity of goods and services (i.e., GDP/GNI measures), whereas HDI focuses on human welfare, not output quantity.
- (d) describes a price index for healthcare and education, which would be a cost/price measure (like CPI subindices), not the HDI’s composite welfare index.

Conclusion: The correct choice is (a). This matches the provided answer: an index measuring life expectancy, education and per capita income indicators used to rank countries in terms of human development.

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