Milorad Kovacevic Human Development Report Office, UNDP Workshop on Measuring Human Development, June 14,2013 GIZ, Eschborn, Germany 1 HDI and Inequality United Nations Development Programme Human Development Report Office

HDRO 2 Inequality and Human Development Equality is at the core of the human development approach which intrinsically pursues the value of social justice The country-average HDI conceals wide disparities in distribution of HD across population within a country False impression: Every one within the country has the same HDI  Equal distribution of HD within the country Two countries with different distributions of achievements can have the same average HDI

HDRO 3 Inequality in dimensions of HDI A statistical measure that characterizes the dispersion in the distribution of some attribute – the second moment of the distribution… or …a summary measure of the “loss in the social objective as compared to the potential degree of achievement, with loss being] interpreted as the loss that can be attributed to inequalities.” Inequality in concentration of income and other forms of material wealth Inequality in distribution of other characteristics (e.g., years of education) is often recognized, but rarely measured and always questioned.

HDRO 4 Inequality in dimensions of HDI How to interpret inequality in health? Would societies be willing to shorten some people’s lives or lower their educational achievements to lower health or education inequality? Or Should societies accept the fact that some people die young--some even before their 5th birthday? The idea is not to shorten lives but to increase for those with low levels of survival --through policies?

HDRO 5 Disposable Income, simulated Distribution of years of schooling Example: India, Source: DHS 2005/06 Distributions of HDI dimensions

HDRO 6 Life expectancy Atkinson measure( ε=1) Afghanistan Bangladesh Bhutan India Iran Maldives Nepal Pakistan Sri Lanka Distribution of (expected) length of life, from life tables India Age-group w my … … …

HDRO 7 Inequality-adjusted Dimensional Indices Distributional data at the level of household or individual Variables relevant to three dimension: Household consumption or income per capita Years of schooling Expected length of life Source of data: Nationally representative household surveys UN life tables

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Additional Concerns Income index (log transformed) is adjusted by inequality from untransformed income data Atkinson index cannot be calculated when zero values are present; an arbitrary solution Choice of ε in the Atkinson index: - Aversion to inequality, ε, can be both - dimension and country specific: 150 countries x 3 dimensions = 450 ε. 12

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