Open Access Journal Article

The Sensitivity of the Human Development Index to Assumptions about Income

by Maria Cornachione Kula a,* ,  Charles J. Moyer, Jr. b  and  Priniti Panday a
a
Mario J. Gabelli School of Business, Roger Williams University, Bristol, US
b
Moyer Realty Advisors, Allentown, US
*
Author to whom correspondence should be addressed.
JEA  2025 4(1):96; https://doi.org/10.58567/jea04010010
Received: 6 March 2024 / Accepted: 10 July 2024 / Published Online: 18 November 2024
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Abstract

The Human Development Index (HDI) aims to present a more robust picture of a country’s development status than that suggested by national income per capita. The HDI aggregates dimension indices based on transformed measures for the core values of health, education, and income per capita. Assumptions are made regarding the upper and lower bounds used to re-scale each core value into its dimension index, as well as the functional form used to create the HDI. The treatment of income in the HDI’s construction suggests incompatibilities with its underlying capability theory, which stresses the importance of individuals’ abilities to make their own consumption and life choices. We examine the currently formulated HDI, as well as two influential proposed alternatives which generalize the aggregation functions of the pre-2010 HDI formulation and the current HDI, in light of recent empirical research into the relationship between well-being and income. We use underlying data for 2016, a representative year, to examine distributional changes as well as specific country rankings. We find that the income bounds used to calculate the income dimension index in the HDI should be changed. We also suggest that the three aggregation formulations, along with prominent descriptions of the assumptions and consequent implications of each approach, should be disseminated for policymakers and the public to consider.

Keywords: Capabilities approach; Human Development Index; measurement of human development; income satiation;
Copyright: © 2024 by Kula, Moyer, Jr. and Panday. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

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ACS Style
Kula, M. C.; Moyer, Jr., C. J.; Panday, P. The Sensitivity of the Human Development Index to Assumptions about Income. Journal of Economic Analysis, 2025, 4, 96. https://doi.org/10.58567/jea04010010
AMA Style
Kula M C, Moyer, Jr. C J, Panday P. The Sensitivity of the Human Development Index to Assumptions about Income. Journal of Economic Analysis; 2025, 4(1):96. https://doi.org/10.58567/jea04010010
Chicago/Turabian Style
Kula, Maria C.; Moyer, Jr., Charles J.; Panday, Priniti 2025. "The Sensitivity of the Human Development Index to Assumptions about Income" Journal of Economic Analysis 4, no.1:96. https://doi.org/10.58567/jea04010010
APA style
Kula, M. C., Moyer, Jr., C. J., & Panday, P. (2025). The Sensitivity of the Human Development Index to Assumptions about Income. Journal of Economic Analysis, 4(1), 96. https://doi.org/10.58567/jea04010010

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