HDI (Human Development Index)

Human Development Index (HDI) - is a comprehensive indicator developed by the United Nations Development Program (UNDP) in 1990 to assess the standard of living, education and longevity of the population in countries around the world. It allows comparing human potential and quality of life between different territories, identifying strengths and weaknesses in development. The methodology was first proposed by Pakistani economist Mahbub ul Haq.

Main components of the HDI

The HDI is calculated based on three key indicators:

• Life expectancy - reflects the health and longevity of the population.
• Level of education - Includes:
  • Average years of schooling for the adult population (25 years and older).
  • The expected duration of schooling for school-age children.
• Standard of living - is measured by gross national income (GNI) per capita, adjusted for purchasing power parity (PPP).

Calculation methodology

For each component, an index is determined using the formula:

Index = (Actual value - Minimum value) / (Maximum value - Minimum value)​

For example, for life expectancy:

• Minimum value: 20 years.
• Maximum value: 85 years.

The final HDI is calculated as the geometric mean of three indices. For example, for a hypothetical country with the indices:

• Life expectancy: 75 years (index 0.846).
• Education: 0.75.
• GNI per capita: 0.667.

HDI = root of ($=0,751$.

Classification of countries

Countries are divided into four groups:

• Very high (≥0.800): Norway, Switzerland, Australia
• High (0.700-0.799): Russia, China
• Medium (0.550-0.699): India, Brazil
• Low (<0.550): Nigeria, CAR

Criticism and limitations

• Does not account for inequality: the HDI is based on averages, which hides internal disparities.
• Ignores the quality of education: Evaluates only the number of years of education, not its effectiveness.
• Does not include environmental and social factors: For example, security, level of corruption.
• Does not reflect subjective perceptions of well-being and psychological aspects of quality of life.
• Does not show the distribution of income within the country.

Areas of application of the HDI

The HDI remains a key tool for assessing progress in human development, but needs to be complemented by other indicators for a complete picture. It is used for international comparisons of the level of development of the world, its individual regions and countries in terms of human capabilities.

Some applications of HDI:

• Comparative characterization of different countries and regions. The HDI allows us to distinguish between developed, developing and underdeveloped countries, and to assess how economic policy affects the quality of life.
• Identifying trends in development. Changes in the HDI over time make it possible to assess a country's progress in human development.
• Identification of factors affecting the level of human development. The HDI helps to identify inequalities in access to education, health and other resources within a country.
• Evaluate the effectiveness of policies and programs aimed at improving the standard of living and well-being of the population.
• Developing recommendations and strategies to improve people's livelihoods.
• Utilization for international grants and aid.
• Impact on investment attractiveness of countries.

Since 2010, an adjusted HDI (HDI) has been introduced that takes inequality into account, making it a more accurate tool for analysis.