Using Spatial Factor Analysis to Measure Human Development

62 Pages Posted: 23 Oct 2017

See all articles by Qihua Qiu

Qihua Qiu

Georgia State University - Department of Economics

Jaesang Sung

Georgia State University - Andrew Young School of Policy Studies - Department of Economics

Will Davis

Georgia State University, Andrew Young School of Policy Studies, Department of Economics, Students

Rusty Tchernis

Georgia State University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2017

Abstract

We propose a Bayesian factor analysis model as an alternative to the Human Development Index (HDI). Our model provides methodology which can either augment or build additional indices. In addition to addressing potential issues of the HDI, we estimate human development with three auxiliary variables capturing environmental health and sustainability, income inequality, and satellite observed nightlight. We also use our method to build a Millennium Development Goals (MDG) index as an example of constructing a more complex index. We find the “living standard” dimension provides a greater contribution to human development than the official HDI suggests, while the “longevity” dimension provides a lower proportional contribution. Our results also show considerable levels of disagreement relative to the ranks of official HDI. We report the sensitivity of our method to different specifications of spatial correlation, cardinal-to-ordinal data transforms, and data imputation procedures, along with the results of a simulated data exercise.

Suggested Citation

Qiu, Qihua and Sung, Jaesang and Davis, Will and Tchernis, Rusty, Using Spatial Factor Analysis to Measure Human Development (October 2017). NBER Working Paper No. w23952. Available at SSRN: https://ssrn.com/abstract=3057183

Qihua Qiu (Contact Author)

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

Jaesang Sung

Georgia State University - Andrew Young School of Policy Studies - Department of Economics ( email )

14 Marietta St
Atlanta, GA
United States

Will Davis

Georgia State University, Andrew Young School of Policy Studies, Department of Economics, Students ( email )

35 Broad Street
Atlanta, GA
United States

Rusty Tchernis

Georgia State University - Department of Economics ( email )

P.O. Box 3992
Atlanta, GA 30302-3992
United States

HOME PAGE: http://www2.gsu.edu/~ecort

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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