Remeasuring the HDI by Data Envelopement Analysis

36 Pages Posted: 6 Feb 2012

See all articles by Bernhard Mahlberg

Bernhard Mahlberg

Institute for Industrial Research (IWI); Vienna University of Economics and Business - Institute for Production Management

Michael Obersteiner

International Institute for Applied Systems Analysis (IIASA); Institute for Advanced Studies (IHS)

Date Written: December 18, 2001

Abstract

The measurement of human development has a potentially strong impact on how the development gap is viewed and on the formulation of new policies. Therefore correct and fair measurement is of great importance. In this paper, we develop an algorithm to compute comprehensive differentiation rules suitable for measuring human development. We used models from Data Envelopment Analysis (DEA) literature to compare performance in a multiple output setting. The models were evaluated by empirically re-estimating the human development index (HDI). The most notable advantages of DEA models are that they endogenously construct a non-linearly arranged set of best practice countries and that the weights of each indicator entering the HDI is endogenously determined based on an optimization calculus. These weights are allowed to vary thereby accounting for cross-sectional heterogeneity. While country clusters are identified by their similarity, some interesting outliers can also be singled out using DEA. Such outliers are either best practice frontier countries or countries that are locked in an underdevelopment trap.

Keywords: Human Development Index, Benchmarking

JEL Classification: O10

Suggested Citation

Mahlberg, Bernhard and Obersteiner, Michael, Remeasuring the HDI by Data Envelopement Analysis (December 18, 2001). Available at SSRN: https://ssrn.com/abstract=1999372 or http://dx.doi.org/10.2139/ssrn.1999372

Bernhard Mahlberg (Contact Author)

Institute for Industrial Research (IWI) ( email )

Mittersteig 10/4
Vienna, 1050
Austria
+43 1 513 44 11 0 (Phone)
+43 1 513 44 11 2099 (Fax)

HOME PAGE: http://www.iwi.ac.at/

Vienna University of Economics and Business - Institute for Production Management ( email )

Welthandelsplatz 1
Building D2, Entrance C, 3rd floor
Vienna, 1020
Austria
+43 1 313 36 - 5615 (Phone)

HOME PAGE: http://https://www.wu.ac.at/en/prodmanengl/

Michael Obersteiner

International Institute for Applied Systems Analysis (IIASA) ( email )

Schlossplatz 1
Laxenburg, A-2361
Austria

Institute for Advanced Studies (IHS) ( email )

Josefstädter Straße 39
1080 Vienna
Austria

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