The human development index as a criterion for optimal planning

Engineer, Merwan, King, Ian and Roy, Nilanjana (2008) The human development index as a criterion for optimal planning. Indian Growth and Development Review, 1 2: 172-192. doi:10.1108/17538250810903774

Author Engineer, Merwan
King, Ian
Roy, Nilanjana
Title The human development index as a criterion for optimal planning
Journal name Indian Growth and Development Review   Check publisher's open access policy
ISSN 1753-8254
Publication date 2008
Year available 2008
Sub-type Article (original research)
DOI 10.1108/17538250810903774
Open Access Status Not Open Access
Volume 1
Issue 2
Start page 172
End page 192
Total pages 21
Place of publication Bingley, United Kingdom
Publisher Emerald Group Publishing
Language eng
Formatted abstract
Purpose: The human development index (HDI) and gender‐related development index (GDI) have become accepted as leading measures for ranking human well being in different countries. The purpose of this paper is to identify the planning policies that improve these indices and to also suggest modifications to the indices that yield more sensible policies.

Design/methodology/approach: This paper solves the first‐best welfare problem in which the planner maximizes a development index subject to resource constraints.

Findings: Planning strategies that maximize the HDI tend towards minimizing consumption and maximizing expenditures on education and health. Interestingly, such strategies also tend towards equitable allocations, even though inequality aversion is not modelled in the HDI. The paper shows that the GDI generates optimal plans with similar properties, and determine when the GDI and HDI generate consistent optimal plans. A problematic feature of the optimal plans is that the income component in the HDI (or GDI) does not play its intended role of securing resources for a decent standard of living. Rather, it acts to distort the allocation between health and education expenditure. The paper argues that it is better to drop income from the index. Alternatively, the paper considers net income, income net of education and health expenditures, as indicating capabilities not already reflected in the index. Finally, it compares how the modified indices and the HDI rank countries.

Originality/value: The paper is believed to be the first to integrate development indices into national development planning
Keyword Human Development Index
Social welfare policy
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Non-UQ

Document type: Journal Article
Sub-type: Article (original research)
Collection: School of Economics Publications
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Created: Fri, 18 Mar 2016, 15:09:03 EST by Karen Warren on behalf of School of Economics