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Measuring development

Studying development is about measuring how developed one country is compared to other countries, or to the same country
in the past. Development measures how economically, socially, culturally or technologically advanced a country is. The two
most important ways of measuring development are economic development and human development.

Economic development is a measure of a country's wealth and how it is generated (for example agriculture is considered
less economically advanced then banking).
Human development measures the access the population has to wealth, jobs, education, nutrition, health, leisure and safety as well as political and cultural freedom. Material elements, such as wealth and nutrition, are described as the standard of
living. Health and leisure are often referred to as quality of life.

Development indicators
There is no single way to calculate the level of development because of the variety of economies, cultures and peoples.
Geographers use a series of development indicators to compare the development of one region against another. For
example:
1.

Health. Do the population have access to medical care? What level of healthcare is available - basic or advanced? Is it
free?
2. Industry. What type of industry dominates? LEDCs focus on primary industries, such as farming, fishing and
mining. MEDCs focus on secondary industries, such as manufacturing. The most advanced countries tend to focus more
on tertiary or service industries, such as banking and information technology.
3. Education. Do the population have access to education? Is it free? What level of education is available (ie primary,
secondary or further/higher education)?
MEDCs are countries which have a high standard of living and a large GDP. LEDCs are countries with a low standard of living
and a much lower GDP.
To assess the economic development of a country, geographers use economic indicators including:

Gross Domestic Product (GDP) is the total value of goods and services produced by a country in a year.
Gross National Product (GNP) measures the total economic output of a country, including earnings from foreign
investments.
GNP per capita is a country's GNP divided by its population. (Per capita means per person.)
Economic growth measures the annual increase in GDP, GNP, GDP per capita, or GNP per capita.
Inequality of wealth is the gap in income between a country's richest and poorest people. It can be measured in many ways,
(e.g. the proportion of a country's wealth owned by the richest 10 per cent of the population, compared with the proportion
owned by the remaining 90 per cent).
Inflation measures how much the prices of goods, services and wages increase each year. High inflation (above a few
percent) can be a bad thing, and suggests a government lacks control over the economy.
Unemployment is the number of people who cannot find work.
Economic structure shows the division of a country's economy between primary, secondary and tertiary industries.
Demographics study population growth and structure. It compares birth rates to death rates, life expectancy and urban and
rural ratios. Many LEDCs have a younger, faster-growing population than MEDCs, with more people living in the
countryside than in towns. The birth rate in the UK is 11 per 1,000, whereas in Kenya it is 40.

Human development indicators

Development often takes place in an uneven way. A country may have a very high GDP - derived, for example, from the
exploitation of rich oil reserves - while segments of the population live in poverty and lack access to basic education, health
and decent housing.
Hence the importance of human development indicators, measuring the non-economic aspects of a country's development.

A school in Guinea

A classroom in the UK

Human development indicators include:

Life expectancy - the average age to which a person lives, eg this is 79 in the UK and 48 in Kenya.
Infant mortality rate - counts the number of babies, per 1000 live births, who die under the age of one. This is 5 in the UK
and 61 in Kenya.
Poverty - indices count the percentage of people living below the poverty level, or on very small incomes (eg under 1 per
day).
Access to basic services - the availability of services necessary for a healthy life, such as clean water and sanitation.
Access to healthcare - takes into account statistics such as how many doctors there are for every patient.
Risk of disease - calculates the percentage of people with diseases such as AIDS, malaria and tuberculosis.
Access to education - measures how many people attend primary school, secondary school and higher education.
Literacy rate - is the percentage of adults who can read and write. This is 99 per cent in the UK, 85 per cent in Kenya and 60
per cent in India.
Access to technology - includes statistics such as the percentage of people with access to phones, mobile phones, television
and the internet.
Male/female equality - compares statistics such as the literacy rates and employment between the sexes.
Government spending priorities - compares health and education expenditure with military expenditure and paying off
debts.

(HDI)

The Human Development Index (HDI) is a composite statistic of life expectancy, education, and income indices used
to rank countries into four tiers of human development. It was created by Pakistani economist Mahbub ul Haq and
Indian economist Amartya Sen in 1990,[1] and was published by the United Nations Development Programme
Life expectancy is a statistical average of the number of years a human is expected to live

New method (2010 Report onwards)


Published on 4 November 2010 (and updated on 10 June 2011), starting with the 2010 Human Development Report the
HDI combines three dimensions:

A long and healthy life: Life expectancy at birth

Education index: Mean years of schooling and Expected years of schooling

A decent standard of living: GNI per capita (PPP US$)

In its 2010 Human Development Report, the UNDP began using a new method of calculating the HDI. The following
three indices are used:
1. Life Expectancy Index

(LEI)

2. Education Index (EI)

2.1 Mean Years of Schooling Index (MYSI)

2.2 Expected Years of Schooling Index (EYSI)

[7]

[8]

3. Income Index (II)


Finally, the HDI is the geometric mean of the previous three normalized indices:

LE: Life expectancy at birth


MYS: Mean years of schooling (Years that a 25-year-old person or older has spent in schools)
EYS: Expected years of schooling (Years that a 5-year-old child will spend with his education in his whole life)
GNIpc: Gross national income at purchasing power parity per capita

The 2010 Human Development Report introduced an Inequality-adjusted Human Development Index (IHDI). While
the simple HDI remains useful, it stated that "the IHDI is the actual level of human development (accounting for
inequality)" and "the HDI can be viewed as an index of 'potential' human development (or the maximum IHDI that
could be achieved if there were no inequality)"

A United Nations study has ranked India at 134 out of 187 countries in terms of Human Development Index

The origins of the HDI are found in the annual Development Reports of the United Nations Development Program
me (UNDP)

Limitations of Human Development Index

Wide divergence within countries. For example, countries like China and Kenya have widely different HDI
scores depending on the region in question. (e.g. north China poorer than south east)
HDI reflect long-term changes (e.g. life expectancy) and may not respond to recent short-term changes.
Higher National wealth GDI may not necessarily increase economic welfare, it depends how it is spent.
Also higher GDI per capita may hide widespread inequality within a country. Some countries with higher
real GDI per capita have high levels of inequality (e.g. Russia, Saudi Arabia)
However, HDI can highlight countries with similar GDI per capita but different levels of economic
development.
Economic welfare depends on several other factors, such as threat of war, levels of pollution, access to
clean drinking water e.t.c.

This is a list of Indian states by their respective Human Development Index (HDI), as of 2008.[2] Kerala stands first in
Human Development Index among the states in India.

Gini coefficient
The Gini coefficient (also known as the Gini index or Gini ratio) (/dini/ jee-nee) is a measure of statistical
dispersion intended to represent the income distribution of a nation's residents. This is the most commonly used
measure of inequality. The coefficient varies between 0, which reflects complete equality and 100 (or 1), which
indicates complete inequality (one person has all the income or consumption, all others have none).
A low Gini coefficient indicates a more equal distribution, with 0 corresponding to complete equality, while higher
Gini coefficients indicate more unequal distribution, with 1 corresponding to complete inequality. When used as a
measure of income inequality, the most unequal society (assuming no negative incomes) will be one in which a single
person receives 100% of the total income and the remaining people receive none (G = 11/N); and the most equal
society will be one in which every person receives the same income (G = 0).
The Gini index is defined as a ratio of the areas on the Lorenz curve diagram.
the Lorenz curve is a graphical representation of the cumulative distribution function of the empirical probability
distribution of wealth or income, and was developed by Max O. Lorenz in 1905 for representing inequality of
the wealth distribution.

The Gini index is defined as a ratio of the areas on


the Lorenz curve diagram. If the area between the line of perfect equality and the Lorenz curve is A, and the area under
the Lorenz curve is B, then the Gini index G = A / (A + B). Since A + B = 0.5, the Gini index is G = 2 * A or G = 1
2 B.

Gini coefficients of social development


Gini coefficient is widely used in fields as diverse as sociology, economics, health science, ecology, engineering and
agriculture. For example, in social sciences and economics, in addition to income Gini coefficients, scholars have
published education Gini coefficients and opportunity Gini coefficients.

Gini coefficient of education


Education Gini index estimates the inequality in education for a given population. It is used to discern trends in social
development through educational attainment over time. From a study of 85 countries, Thomas, et al. estimate Mali had
the highest education Gini index of 0.92 in 1990 (implying very high inequality in education attainment across the
population), while the United States had the lowest education inequality Gini index of 0.14. Between 1960 and 1990,
South Korea, China and India had the fastest drop in education inequality Gini Index. They also claim education Gini
index for the United States slightly increased over the 19801990 period.

Gini coefficient of opportunity


Similar in concept to income Gini coefficient, opportunity Gini coefficient measures inequality of opportunity. The
concept builds on Amartya Sen's suggestion that inequality coefficients of social development should be premised on
the process of enlarging peoples choices and enhancing their capabilities, rather than process of reducing income
inequality. Kovacevic in a review of opportunity Gini coefficient explains that the coefficient estimates how well a

society enables its citizens to achieve success in life where the success is based on a persons choices, efforts and
talents, not his background defined by a set of predetermined circumstances at birth, such as, gender, race, place of
birth, parent's income and circumstances beyond the control of that individual.
In 2003, Roemer reported Italy and Spain exhibited the largest opportunity inequality Gini index amongst advanced
economies.

Features of Gini coefficient


The Gini coefficient has features that make it useful as a measure of dispersion in a population, and inequalities in
particular. It is a ratio analysis method making it easier to interpret. It also avoids references to a statistical average or
position unrepresentative of most of the population, such as per capita income or gross domestic product. For a given
time interval, Gini coefficient can therefore be used to compare diverse countries and different regions or groups within
a country; for example states, counties, urban versus rural areas, gender and ethnic groups. Gini coefficients can be
used to compare income distribution over time, thus it is possible to see if inequality is increasing or decreasing
independent of absolute incomes.
Other useful features of the Gini coefficient include:

Anonymity: it does not matter who the high and low earners are.

Scale independence: the Gini coefficient does not consider the size of the economy, the way it is measured, or
whether it is a rich or poor country on average.

Population independence: it does not matter how large the population of the country is.

Transfer principle: if income (less than the difference), is transferred from a rich person to a poor person the
resulting distribution is more equal.

Limitations of Gini coefficient


The Gini coefficient is a relative measure. Its proper use and interpretation is controversial. Mellor explains[52] it is
possible for the Gini coefficient of a developing country to rise (due to increasing inequality of income) while the
number of people in absolute poverty decreases. This is because the Gini coefficient measures relative, not absolute,
wealth. Kwok concludes[53] that changing income inequality, measured by Gini coefficients, can be due to structural
changes in a society such as growing population (baby booms, aging populations, increased divorce rates, extended
family households splitting into nuclear families, emigration, immigration) and income mobility. Gini coefficients are
simple, and this simplicity can lead to oversights and can confuse the comparison of different populations; for example,
while both Bangladesh (per capita income of $1,693) and the Netherlands (per capita income of $42,183) had an
income Gini index of 0.31 in 2010, the quality of life, economic opportunity and absolute income in these countries are
very different, i.e. countries may have identical Gini coefficients, but differ greatly in wealth. Basic necessities may be
available to all in a developed economy, while in an undeveloped economy with the same Gini coefficient, basic
necessities may be unavailable to most or unequally available, due to lower absolute wealth.
Different income distributions with the same Gini coefficient

Even when the total income of a population is the same, in certain situations two countries with different income
distributions can have the same Gini index (e.g. cases when income Lorenz Curves cross).[47] Table A illustrates one
such situation. Both countries have a Gini index of 0.2, but the average income distributions for household groups are
different. As another example, in a population where the lowest 50% of individuals have no income and the other 50%
have equal income, the Gini coefficient is 0.5; whereas for another population where the lowest 75% of people have
25% of income and the top 25% have 75% of the income, the Gini index is also 0.5. Economies with similar incomes
and Gini coefficients can have very different income distributions. Bell and Liberati claim that to rank income
inequality between two different populations based on their Gini indices is sometimes not possible, or misleading.[55]
Extreme wealth inequality, yet low income Gini coefficient
A Gini index does not contain information about absolute national or personal incomes. Populations can have very low
income Gini indices, yet simultaneously very high wealth Gini index. By measuring inequality in income, the Gini
ignores the differential efficiency of use of household income. By ignoring wealth (except as it contributes to income)
the Gini can create the appearance of inequality when the people compared are at different stages in their life. Wealthy
countries such as Sweden can show a low Gini coefficient for disposable income of 0.31 thereby appearing equal, yet
have very high Gini coefficient for wealth of 0.79 to 0.86 thereby suggesting an extremely unequal wealth distribution
in its society.[56][57] These factors are not assessed in income-based Gini.

Other uses
Although the Gini coefficient is most popular in economics, it can in theory be applied in any field of science that
studies a distribution. For example, in ecology the Gini coefficient has been used as a measure of biodiversity, where
the cumulative proportion of species is plotted against cumulative proportion of individuals.[77] In health, it has been
used as a measure of the inequality of health related quality of life in a population.[78] In education, it has been used as a
measure of the inequality of universities.[79] In chemistry it has been used to express the selectivity of protein kinase
inhibitors against a panel of kinases.[80] In engineering, it has been used to evaluate the fairness achieved by Internet
routers in scheduling packet transmissions from different flows of traffic.[81] In statistics, building decision trees, it is
used to measure the purity of possible child nodes, with the aim of maximizing the average purity of two child nodes
when splitting, and it has been compared with other equality measures.[82]
The Gini coefficient is sometimes used for the measurement of the discriminatory power of rating systems in credit
risk management.[83]
The discriminatory power refers to a credit risk model's ability to differentiate between defaulting and non-defaulting
clients. The formula , in calculation section above, may be used for the final model and also at individual model factor
level, to quantify the discriminatory power of individual factors. It is related to accuracy ratio in population assessment
models.