How do human development index (hdi) and gross domestic product (gdp) compare in what they measure?

Global Gross Domestic Product and Human Development Index, 2015

Source: UNEP (2012): The UNEP Environmental Data Explorer, as compiled from World Development Indicators (WDI-The World Bank). United Nations Environment Programme.

The Gross Domestic Product (GDP) is the total output of goods and services for final use produced by an economy, by both residents and non-residents. It is equal to consumption plus gross capital formation plus exports, fewer imports, and includes subsistence products produced by households for their own use, valued at current local prices for comparable commodities. The GDP is often divided by the population to express the standard of living since it is a rough approximation of the amount of wealth per person (there are issues of wealth distribution that are not well reflected in GDP per capita figures).

The World Bank often uses GDP per capita to classify the level of economic development of nations. The wealthiest nations account for the largest markets in the world. The GDP is thus a reasonable approximation of the size of a market, but not necessarily of the standards of living (or quality of life). For instance, China has a much higher GDP than Korea, implying that China is a bigger market, but Korea is a more sophisticated economy with higher standards of living.

The Human Development Index (HDI) is a composite measure ranging from 0 to 1 that includes life expectancy, education (literacy rate), and standards of living (GDP per capita). It is more representative of the commercial potential with countries with an HDI above 0.8, accounting for the world’s leading markets. This commercial potential and dynamism shape global transactions and flows.

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Elistia Elistia, Barlia Annis Syahzuni

Economic growth is an important factor in the economic development of a country. There is a number of factors that can increase economic growth namely human development. The level of human development in a country array in the value of the Human Development Index (HDI). The growth rate of a country appears in the value of the Gross Domestic Product (GDP) per Capita. The influence of human power resources is shown in the value of HDI which is able to influence the level of economic growth in the value of its GDP. This study will examine the effect of HDI on economic growth in 10 (ten) ASEAN member countries during the period 2010-2016, namely Indonesia, Singapore, Malaysia, Thailand, Brunei Darussalam, Philippines, Laos, Vietnam, Myanmar, and Cambodia against its economic growth in its GDP per capita. Several literature studies such Ciobanu Oana (2015), Swaha Shome et.al (2010), Mihu? Loana Sorina (2013), show that there are a relationship and an influence of Human Development Index's value on Gross Domestic Product (GDP) per capita. The result of this research indicates that each country has a strong and significant correlation between HDI and GDP. It is concluded that the level of HDI can affect the GDP per capita. Economic growth makes it possible to reach a high level of human development, on the one hand, increasing levels of human development leading to increase opportunities for economic growth. The causal relationship between economic growth and human development becomes a mutually influential relationship. So it is clear that the human development in the country relates to an influence of economic growth which is seen in per capita income (GDP per capita) which can be an indicator of welfare in the country.

Human Development Index, Gross Domestic Product, Economic Growth, ASEAN Economic Community

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DOI: 10.33751/jhss.v2i2.949

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The HDI was created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone.

The Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and have a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions.

The health dimension is assessed by life expectancy at birth, the education dimension is measured by mean of years of schooling for adults aged 25 years and more and expected years of schooling for children of school entering age. The standard of living dimension is measured by gross national income per capita. The HDI uses the logarithm of income, to reflect the diminishing importance of income with increasing GNI. The scores for the three HDI dimension indices are then aggregated into a composite index using geometric mean. Refer to Technical notes for more details.

The HDI can be used to question national policy choices, asking how two countries with the same level of GNI per capita can end up with different human development outcomes. These contrasts can stimulate debate about government policy priorities.

The HDI simplifies and captures only part of what human development entails. It does not reflect on inequalities, poverty, human security, empowerment, etc. The HDRO provides other composite indices as broader proxy on some of the key issues of human development, inequality, gender disparity and poverty.

A fuller picture of a country's level of human development requires analysis of other indicators and information presented in the HDR statistical annex.

The Human Development Index (HDI) assigns numerical values to different countries as a measure of human prosperity. These values are derived by measuring levels of education, standard of living, and life expectancy. Countries with higher scores on the index are said to be better developed than those with lower scores.

The system is designed to help determine strategies for improving living conditions for people around the world. HDI values are often influential in conjunction with gross domestic product (GDP) and can affect a nation's fiscal and public policy. However, some critics argue that these measures are flawed and do not create an accurate picture of prosperity.

The Human Development Index (HDI) is a statistic the United Nations developed and compiled to measure various countries' levels of social and economic development.
HDI values are influential and can affect the fiscal and public policy of a nation.
Critics argue that the HDI's measurements are flawed and do not create an accurate picture of prosperity.

The HDI was developed by Pakistani economist Mahbub ul Haq and Indian Nobel laureate Amartya Sen and eventually launched in 1990.

The goal was to measure development beyond just focusing on how much money people have. The HDI is calculated as the geometric mean of the following:

The health factor is assessed by life expectancy at birth.
The standard of living factor is assessed by gross national income (GNI) per capita.
The education factor is assessed by the mean years of schooling for adults and the expected years of schooling for children of school entering age.

Critics argue that the HDI assigns weights to certain factors that are equal tradeoffs when these measurements may not always be equally valuable. For example, countries could achieve the same HDI through different combinations of life expectancy and GNI per capita. This would imply that a person's life expectancy has an economic value.

An additional year of life would add to the GNI and thus be different in countries with different GNI per capita.

It also correlates factors that are more common in developed economies. For example, a higher level of education would tend to lead to higher GNI per capita. Critics argue the benefit or lack thereof of including two highly correlated values when perhaps one would be a better indicator of a country's well-being.

The HDI also fails to take into account factors such as inequality, poverty, and gender disparity. A country with a high value for GNI per capita would indicate a developed country, but what if that GNI is reached by marginalizing certain genders or ethnic classes? And what if that GNI is achieved by a small percentage of the population that is wealthy and, therefore, ignores the poor?

Furthermore, the values of the factors that make up the HDI are bound between 0 and 1. This means that certain countries that already have high GNIs, for example, have little room to improve in terms of GNI score even if their GNI continues to grow and improve. This same parameter affects the logic of the life expectancy score.

The HDI is controversial because it is highly influential yet considered to be deeply flawed. The United Nations itself even admits that the HDI is not “a comprehensive measure of human development” and that the index is slow to reflect recent policy changes and improvements to the lives of a nation’s citizens.

The HDI was designed to measure development not just in terms of how much money people have but also in terms of education and length of life. The problem is not everyone is happy about the choice of indicators nor the way they are aggregated.

The HDI focuses on the following four factors: mean years of schooling, expected years of schooling, life expectancy at birth, and gross national income (GNI) per capita.

The HDI is designed to consider other factors besides wealth, allowing a multifaceted examination of global prosperity and emerging market nations. However, the weaknesses of this measurement lead some critics to challenge its practicality for use in establishing foreign policy. This measurement does not sufficiently capture other factors that influence prosperity either.