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Quantitative Methods in Social Sciences (E774): Review Session II. Dany Jaimovich September 30, 2009. Plan for today. Re-review HDI Alternative indexes Do we need these indexes? The International Reports. Re-review. Our basic idea: Motivation vs Research question

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Quantitative methods in social sciences e774 review session ii

Quantitative Methods inSocial Sciences (E774): Review Session II

Dany Jaimovich

September 30, 2009

Plan for today
Plan for today

  • Re-review

  • HDI

  • Alternative indexes

  • Do we need these indexes?

  • The International Reports

Re review

  • Our basic idea:

  • Motivation vs Research question

  • Normative vs Positive questions

Re review1

  • What is development?

  • How to measure development?

  • At what level?

  • How do we formulate research questions about development?

Re review2

  • The MDG as development…

    • ◦Propaganda

    • ◦Critics … “The Road to Heaven is Paved with Good Intentions”

Human development index hdi
Human Development Index(HDI)

  • Since 1990, one of the most recognized indicators of development.

  • A lot of publicity

  • Incentives comparison and “competition among countries”

  • Widely available, allowing cross-country comparisons…. But be careful!

Human development index hdi1
Human Development Index(HDI)

  • Pioneered by Mahbub ul Haq, is the core indicator elaborated by UNDP.

  • The foundations are based in Amartya Sen’s ideas: development as freedom and the capabilities approach (different from basic needs)

  • Provides a annual rank of countries according to the HDI.

Human development index hdi2
Human Development Index(HDI)

  • Based in three fundamental aspects of development:

    • Life expectancy at birth, as an index of population health and longevity

    • Knowledge and education, as measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting).

    • Standard of living, as measured by the natural logarithm of gross domestic product per capita at purchasing power parity.

Human development index hdi3
Human Development Index(HDI)

  • How to put this three variables together in one index? The original units are years, percentages and money….

  • There is a need to STANDARDIZE:

  • x-index =

  • E.g, Life Expectacy=

Human development index hdi4
Human Development Index(HDI)

  • The final index is the simple average of the three components

  • Country categories:

    • >0.8, High Development

    • 0.5<HDI<0.79, Medium Development

    • <0.5, Low Development

Human development index hdi8
Human Development Index(HDI)

  • How to define max and min?:

    • Relative to the sample

    • Relative to defined fixed values

  • Why to chose one of these options?

Human development index hdi9
Human Development Index(HDI)

  • How to incorporate GDP?

    • Log is very smooth:

      • GDPpc Luxembourg=$60000, log(GDPpc)=4.78

      • GDPpc Malawi=$667, log(GDPpc)=2.83

    • “GDPpc target” failed:

Human development index hdi10
Human Development Index(HDI)

  • Critics…

    • Why these three indicators and not others???.... Sustainability? HRs? Inequality? Consistency

    • Compensations: less education, but more income?

    • But… changes in methodology do not allow comparison in time. Data are consistent in cross-section but no in the time series.

    • Data quality… how reliable are national sources?

    • National Averages hide within country variation

Alternative indexes
Alternative Indexes

  • An alternative index provided by UNDP is Human Poverty Index (HPI), aimed to measure poverty related issues.

  • There are two different for developed and developing countries:

Alternative indexes1
Alternative Indexes

  • HPI-1 =

  • P1: Probability at birth of not surviving to age 40 (times 100)P2: Adult illiteracy rateP3: Unweighted average of population without sustainable access to an improved water source and children under weight for ageα: 3

Alternative indexes2
Alternative Indexes

  • HPI-2 =

  • P1: Probability at birth of not surviving to age 60 (times 100)P2: Adults lacking functional literacy skillsP3: Population below income poverty line (50% of median adjusted household disposable income)P4: Rate of long-term unemployment (lasting 12 months or more)α: 3

Alternative indexes3
Alternative Indexes

  • Gender-related Development Index (GDI): HDI adjusted by gender differences.

  • The Gender Empowerment Measure (GEM) combines inequalities in three areas:

    • political participation and decision making

    • economic participation and decision making

    • power over economic resources.

Alternative indexes4
Alternative Indexes

  • The Environmental Performance Index (EPI) is a method of quantifying and numerically benchmarking the environmental performance of a country's policies.

Alternative indexes5
Alternative Indexes

  • The Gross National Happiness (GNH) index is generated to reflect the happiness and general well-being of the Bhutanese population more accurately and profoundly than a monetary measure:

    • 1.Psychological Well-being

    • 2.Time Use

    • 3.Community Vitality

    • 4.Culture

    • 5.Health

    • 6.   Education

    • 7.Environmental Diversity

    • 8.Living Standard

    • 9.Governance

  • GNH = 1- Average squared distance from cutoff

Are those indexes useful
Are those indexes useful???

  • Cross-country analysis

  • Macro vs Micro (Meso) development

  • Right or perverse incentives?

International reports
International Reports

  • HDR

  • WDR

  • IPES


International reports1
International Reports

  • Sarkozy commision:

    • Summarize the critics to GDP

    • Right measurement:

      • Consider leisure.

      • General Production vs Household Consumption

      • Inequality: Joint Distribution of development indicators. Mean vs Median.

    • Susteinability.