On the Optimal Construction of the Human Development Index

Mehmet Pinar, Thanasis Stengos, Nikolas Topaloglou

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Abstract

We consider the optimality of the weighting scheme used to construct the Human Development Index (HDI) using an approach that relies on consistent tests for stochastic dominance efficiency. We consider consistent tests for stochastic dominance efficiency of a given index portfolio with respect to all possible indices constructed from a set of individual components. The test statistics and the estimators are computed using mixed integer programming methods. The results show that the equally weighted (fixed weights) HDI index is not optimal and that education by itself offers the best (optimal) indicator of welfare.
Original languageEnglish
Publication statusPublished - 2009
Event64th European Meeting of the Econometric Society - Barcelona, Spain
Duration: 23 Aug 200927 Aug 2009

Conference

Conference64th European Meeting of the Econometric Society
CountrySpain
CityBarcelona
Period23/08/0927/08/09

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Pinar, M., Stengos, T., & Topaloglou, N. (2009). On the Optimal Construction of the Human Development Index. Paper presented at 64th European Meeting of the Econometric Society, Barcelona, Spain.