CE 403: Socio-economic Aspects

of Development Projects
CE 405: Socio-economic Aspects
of Development Projects
Lecture on “Development Indicators”

Shyamal Acharya, Asst. Prof., CE

 Indicator
• An indicator indicates the state or level of
something
Examples:
– The „temperature‟ given by a clinical thermometer is a
measure of body temperature and also an indicator of
sickness.
– The „crude death rate‟ of a population is a measure of
the number of deaths in a society per thousand and
also an indicator of the general level of public health
– car ownership is frequently used as an indicator
of affluence
 Development indicators
• Development = Socio-economic development
• Economic and Social development indicators
point out to social and economic conditions with a
statistical data and analysis in a country, a region
within a country or a city.
– A good indicator points out many other things rather
than just one particular thing.
– It should reflect more aspects of a society than it just
measures directly, because of the complex and
interrelated nature of the development process.
• Examples:
– The „average life expectancy‟ of a new born child
reflects not only the level of health services but such
things as diet, housing conditions, income and so on.
 Development indicators
• Examples (cont‟d)
– Life Expectancy at Birth- is the number of years a new
born infant would live if patterns of mortality prevailing
at its birth were to stay the same throughout its life.
– Adult literacy rate- is the percentage of persons aged
15 and above who can, with understanding, read and
write a short, simple statement
– GDP
– GNP
– Per capita income
– HDI
Importance of development indicators

• Help in identification and diagnosis of particular

problems
– assist in the formulation of specific targets in national
and regional development plans.
• Important in describing development trends
– i.e., income, energy consumption, employment,
health,
• Related study will increase awareness of the
nature and complexity of the development
process
 Limitation of development indicators

• statistical weaknesses in the data is the

major weakness
– Statistics are very often incomplete or
seriously unreliable for international
comparisons and may lead to wrong
assessment of the real situation.
– E.g. Per capita income;
• how about per capita expenditure  PPP
 Economic Indicator: Income Measures

• Gross national income (GNI-formerly gross

national product or GNP)
– the most common indicator,
– measures the value of the total output of goods and
services at home and abroad, accruing to residents
of a country.
• A Closely associated measure is Gross
Domestic Product (GDP)
– a measure of the total output of goods and services
produced wholly within the country‟s territory.
• Thus GNI Comprises GDP plus net income from
foreign sources which is the income residents
receive for services (labor and Capital).
• GNI per capita is calculated dividing GNI by mid-
year population in the corresponding year.
GDP, GNP, GNI
GDP per capita
 GDP limitations
• GDP is measured by taking the quantities of all
goods and services produced, multiplying them by
their prices, and summing the total.
– GDP can be measured either by the sum of what is
purchased in the economy or by what is produced.
• However, there are few limitations
– The exclusion of non-market transactions.
– The failure to account for or represent the degree of
income inequality in society.
– The failure to indicate whether the nation's rate of growth
is sustainable or not.
– Does not consider depreciation of national capital
 Inflation in Bangladesh

Performance over the last 35 years compared with the USA

Inflation rates for consumer goods in Bangladesh

GDP growth in Bangladesh
• While using GDP as an economic measure
be aware of –
– Quality of life
– Non-market transactions
– Income inequality
– Sustainability – loss of natural resources due to
economic expansion
– Economic bads – negative impacts from
economic activity
 Economic Indicator: Income Measures

• Despite many conceptual and statistical

weaknesses, national accounting
measures, e.g., GNI and/or GDP are the
most widely used development indicators
– such measures tries to integrate, several
disparate items such as agriculture, industrial
production and services into a monetary term
– serve as a guide to the ability of a country to
provide a certain level of economic welfare for
its citizens.
 Economic Indicators
• Employment indicator
– such as labor force, payroll, and unemployment data
estimate how many citizens are employed and whether
they are making more or less money than before.
• Provide relevant and robust measures of progress
towards full employment and decent living
standard
• Be clear and straightforward to interpret and
provide a basis for tracking the progress and
international comparison
 Economic Indicators
• Consumer price index
– The Consumer Price Index (CPI) measures change
over time in the prices paid by consumers for a
representative basket of goods and services.

CPIt = consumer price index in current period;

Ct = cost of market basket in current period;
Co = cost of market basket in base period

– The index is a statistical estimate created by using

prices from a sample of representative items collected
periodically.
– Often this measure is used as a gauge of inflation,
 Human Development Index (HDI)
• The Human Development index (HDI) is a
Composition measure of health, education and
income in scale of 0 – 1 (highest HDI=1)
– Measured by UNDP
– reflect the most important dimensions of human
development
– Introduced in the first Human Development Report
(HDR) in 1990 as an alternative to purely economic
assessment of national progress, such as GDP.
– The index was developed in 1990 by a Pakistani
economist Dr. Mahbub-ul-Haq and Indian economist
Amartya Sen
 Human Development Index (HDI)
• HDI is a composite index, it contains three
indicators
– Life expectancy, representing a long and healthy life
– Educational attainment, representing knowledge; and
– Real GDP (in purchasing power parity, PPP),
representing a decent standard of living
• However, HDI is not
– A measure of well being.
– A measure of empowerment.
• HDI indicates that if people have these three
basic choices, they may be able to gain access
to other opportunities as well
Purchasing Power Parity (PPP)
Bangladesh
Purchasing Power Parity (PPP)
 Human Development Index (HDI)
• HDI is a better alternative to GNI per capita
– HDI is increasingly being used to monitor the progress
of nations and of global society
– HDI provides a richer picture of progress than GDP,
which relates to a country‟s wealth, or even GDP per
capita, which tells us something about an individual‟s
means but nothing about their life outcomes
• However, HDI omits several factors that can have
a significant influence on quality of life, such as
environmental degradation, Industrial pollution
and deforestation
 Principles of constructing HDI
• The HDI value for each country indicates how far
that country has to go to attain “Certain defined
goals” with respect to the three components of HDI.
• The closer is a country‟s HDI to 1, the less the
remaining distance that the country has to travel.
Ranking HDI
Very high human development :> 0.800
High human development : 0.700 to 0.799
Medium human development : 0.555 to 0.699
Low human development : < 0.550
 Principles of constructing HDI
• The HDI has three components –
– Life expectancy at birth; number of years a newborn
infant could expect to live if prevailing pattern of age-
specific mortality rates at the time of birth stay the same
throughout the infant‟s life
– Educational Attainment ( comprising adult literacy,
measured in terms of mean year of schooling; and
expected year of schooling); and
– Income.
 Calculating the HDI

Dimensions: A long and Being A decent

healthy life Knowle- Standard of
dgeable living

Life GNI
Indicators: Expectancy MYS & EYS Per capita

Life Education GNI

Dimension index: Expectancy Index Index
Index

The HDI
 Goalposts for Calculating HDI

Dimension Indicator Minimum maximum

Health Life expectancy 20 85

(yrs)
Education expected year 0 18
of Schooling
(yrs)

Mean year of 0 15
Schooling (yrs)
Standard of GNI per capita 100 75,000
Living (PPP $)
 Calculating HDI: education component

• Estimation of Educational Attainment:

2 parameters
– Mean years of Schooling: Average number of
years of education received by people ages 25
and older
– Expected years of schooling: Number of years
of Schooling that a child‟s school entrance age
can expect to receive if prevailing patters of
age- specific enrolment rates persist throughout
the child‟s life
 Calculating HDI: Income component

• The HDI adjusts real income (in

purchasing power parity, or PPP, dollars)
for the diminishing utility of higher levels of
income to human development.
– The premise is that people do not need an
infinite income for a decent standard living.
– Accordingly the logarithm of income is used in
the formula.
 Procedure of constructing HDI
• For any component of the HDI, individual Index
can be computed according to the general
formula

• After Calculating the individual index Values for

the three components, the HDI is calculated as
the geometric mean of the three indices
 HDI Calculation: Bangladesh-2015
• Life expectancy at birth : 72.0 years
• Mean years of Schooling : 5.2 years
• Expected years of schooling : 10.2 years
• GNI per capita (PPP USD) : 3,341
• Current (2015) per
capita GNI for
Bangladesh: USD
1,303
– Note the difference
with GNI per capita in
PPP USD
HDI Calculation: Bangladesh-2015
BGD –HDI time series
 HDI: Bangladesh 2021

(HDI) Rank = 129

• Bangladesh climbed up a
spot to 129 among 191
countries in the 2021 HDI
• Bangladesh‟s HDI value is
0.661 (2021). It is now
above than the average of
0.636 for countries in the
medium human
development group and
above the average of 0.632
for countries in South Asia
but below the world average
of 0.732.
 Criticism of HDI
• Often too similar to GDP per capita in the outcome
of the country rankings.
• The components (health, education and income)
are weighted equally
– but do they equally contribute to human development?
• The components are too narrow
– do not contain indicators of freedom or political
development, which many consider crucial to human
development.
• Do not consider inequalities within countries
• Sustainability is not considered
 Inequality – Development Gap

• Inequality that results from the

development process among nations,
between groups or regions.
– Mostly the income gap
– Gap is mostly widening in its absolute value
• It‟s a challenge to overcome the gap.
• LDCs have to increase their growth rates
• Other problems also there e.g. population
growth
 Inequality Adjusted HDI (IHDI)

• Proposed by Douglas A Hicks from Harvard U

in 1997
• The 2010 HDR introduced the IHDI, which
takes into account inequality in all three
dimensions of the HDI by discounting each
dimension‟s average value according to its
level of inequality.
• The IHDI is basically the HDI discounted for
inequalities.
• BGD 2019  HDI = 0.614, IHDI = 0.465
 Bangladesh – HDI & IHDI

• The country saw its HDI scores persistently improve

over the past consecutive years, including in 2021.
With a current value of 0.661, it ranks at 129 out of
191 countries and places among medium human-
development countries.
– Bangladesh is also one of South Asia's better performers,
with its HDI value above the regional average of 0.632.
• But Inequality is a major challenge: Bangladesh's HDI
value falls to 0.503 when adjusted for inequality,
resulting in a loss of 23.9 percent of its original HDI
value.
 GINI index for inequality measurement
• The Gini coefficient measures the extent to which the
distribution of income within a country deviates from a
perfectly equal distribution.
– A coefficient of 0 expresses perfect equality where everyone has the
same income, while a coefficient of 100 expresses full inequality
where only one person has all the income.
GINI & IHDI of Bangladesh

2021
 Gender inequality
• Gender inequality is discrimination on the
basis of gender causing one gender to be
routinely privileged or prioritized over another.
Gender equality is a fundamental human right
and that right is violated by gender-based
discrimination.
• The root causes of gender inequality
are gender bias and social norms that restrict
women's rights and opportunities, which,
together with preference /comparative
advantage between men and women, are the
root drivers of gender gaps.
 Gender and sex
• Sex is usually categorized as
female or male but there is
variation in the biological attributes
that comprise sex and how those
attributes are expressed.
– Gender refers to the socially
constructed roles, behaviours,
expressions and identities of girls,
women, boys, men, and gender
diverse people
• Gender was first introduced into a
title in 1982, whereas sex had
been used since the early 1920s.
 Gender Inequality Index (GII)

• The 2010 HDR introduced the Gll, which reflects

gender based inequalities in three dimensions-
reproductive health, empowerment, and
economic activity
– Reproductive health is measured by maternal
mortality and adolescent birth rates;
– Empowerment is measured by the share of
parliamentary seats held by women and attainment in
secondary and higher education by each gender; and
– Economic activity is measures by the labor market
participation rate for women and men.
 GII for Bangladesh

Bangladesh‟s GII for 2015 relative to selected countries groups

GII GII Rank Maternal Adolescent Female seats Population with at Labour force
value mortality birth rate in parliament least some participation
ratio secondary rate (%)
education(%)
Female Male Female Male

Bangladesh 0.520 119 176 83.0 20.0 42.0 44.3 43.1 81.0

Nepal 0.497 115 258 71.9 29.5 24.1 41.2 79.7 86.8

Pakistan 0.546 130 178 38.7 20.0 26.5 46.1 24.3 82.2

South Asia 0.520 - 175 33.7 17.4 36.9 58.6 28.3 79.4

Medium HDI 0.491 - 164 40.8 19.9 40.4 57.6 37.2 79.4
 Gender Development Index (GDI)

• In the year 2014, HDR introduced a new

measure, the GDI
– Based on the sex-disaggregated HDI, defined as a
ratio of the female to the male HDI.
• GDI reflects gender inequalities in achievement
in the same three dimensions of the HDI
– Health ( measured by female and male life expected
years of schooling for children and mean years for
adults aged 25 years and older); and command over
economic resources (measured by female and male
estimated GNI per capita).
 GDI for Bangladesh
• Bangladesh‟s GDI for 2015 relative to selected countries and groups
Life expectancy Expected years Mean years of GNI per capita HDI values F-M ratio
at birth of schooling schooling

Female Male Female Male Female Male Female Male Female Male GDI value

Bangladesh 73.3 70.7 10.4 9.9 5.0 5.6 2,379 4,285 0.556 0.599 0.927

Nepal 71.5 68.6 12.7 12.2 3.2 5.0 1,979 2,718 0.538 0.582 0.925

Pakistan 67.4 65.4 7.4 8.8 3,7 6.5 1,498 8,376 0.452 0.610
0.742

South Asia 70.2 67.4 11.3 11.1 4.9 7.8 2,278 9,114 0.549 0.667 0.822

Medium HDI 70.4 66.8 11.5 11.3 5.6 7.8 3,314 9,131 0.582 0.668
0.871
 Multidimensional Poverty Index (MPI)

• The 2010 HDR introduced the MPI, which

identifies multiple overlapping deprivations
suffered by households in 3 dimensions:
education, health and living standards.
– The education and health dimensions are
based on two indicators each, while standard
of living is based on six indicators.
– All of the indicators needed to construct the
MPI for a country are taken from the same
household survey.
 World Development Indicators
• By WB
• Considering six themes
– Poverty and shared prosperity
– People (education, health, job, social protection,
gender etc.)
– Environment
– Economy
– States and markets (public and private sector
investment)
– Global links (size and direction of links that
enables economy to grow)
 Energy use as an indicator (EI)
• Energy use and economic activities are closely linked,
both indicates works performed. Examples:
– Mechanized farming
– Growth of industries
– Transport sector
– Commercial activities
– Energy use in daily life
• However, energy production does not alone indicates
development
– Example: middle east countries
• EI counts in energy unit, GDP counts in monetary
unit. Energy unit is more precise than money unit.
 Alternative measures of development

• Genuine progress indicator (1995 in US)

• Happy Planet Index (2006, UK)
• Gross National Happiness (2008, Bhutan)
• Better Life Index (2011 by OECD)
• ----
GPI
 Gross National
Happiness
• 9 domain
– 33 indicators
Better Life Index

https://www.oecdbetterlifeindex.org/#/51111
111111
Happy planet index
HPI
 Other development indicator??

• Water
• SD indicator