Measuring and Fostering the Progress of Societies:A New Approach for CIS and Eastern European Countries

Moscow, 29-30 September 2008

The Modified Human Development Index (MHDI) and its Applicability for Measuring Progress of Societies,

the Hungarian Experience

Péter Józan M.D, Ph.D., D.Sc.Hungarian Central Statistical Office,

Center for Social Studies at the Hungarian Academy of Sciences

The projects of the Hungarian Central Statistical Office

(HCSO), with respect to the Global OECD Project in general and

to its New Regional Approach in particular are connected to the

issue of Session 3. “What aspects of progress are the most

important for CIS and Eastern European Countries… and how do

we measure them?”

Here may I quote the economist-philosopher Amartya Sen1: “There is, in fact, something of a gap… between the tradition of evaluative statistics, on the one hand, and views of progress on the other, advanced by visionary social scientists.”

According to William H. Draper2 III, “Over the last three decades, a new concept has gained traction, positing that while growth is absolutely necessary for development, it is not sufficient… people must be at the center of development. The aim is to offer people more choices and opportunities to make their own decisions for long, healthy and creative lives.” The variables are, among others, “to have a sustainable livelihood and earn money, the ability to live a long and healthy life and to have access to decent schooling… Human development means more than the intrinsic value of personal fulfillment. An economy that hopes to stay competitive amid globalization must draw on everyone’s talents.”

1, 2 The Measure of America, American Human Development Report 2008–2009, Foreword.

Returning to Amartya Sen’s dichotomous approach, the Hungarian Central Statistical Office is attempting to put evidence based statistical data on a common denominator with the outlook of the “visionary social scientists”. This involves work in two areas to draw up a system of indicators measuring human development.

The outcome of the work is a well-structured set of nearly two hundred human development indicators appropriate – after suitable selection – for the study of any major social area. The system of indicators has already been subject to debate in the Hungarian Academy of Sciences, and on 18 September this year the HCSO organised a one-day conference to discuss the main points of the working document, with the participation of Mr. E. Giovannini.

Work is also in progress on a new version of the UNDP human development index (HDI). The HDI is chiefly based on globalization considerations, and the modified version is designed to be more appropriate for measuring human development in industrial and post-industrial societies. I am going to summarize this latter approach.

Below is an outline of the modifications made to the UNDP

HDI to take account of European conditions, and a brief

discussion of their applicability.

1. The index designed within the HCSO has the name of

modified human development index (MHDI).

2. The MHDI is a composite indicator with three

components:

– Gross income (before taxation) (GI) per capita: GIPC;

– Percentage of adults in the population 25 years old

and older with tertiary educational attainment (PATE)

– Life expectancy at birth.

3. Each component has equal weight in the composite

index.

4. The GIPC was chosen in preference to GDP per capita (used

by the UNDP) because it is available every year in local

administrative units-1, Budapest districts and even the

smallest villages (local administrative units-2), whereas

GDP is calculated only for countries, regions and counties.

At the level of regions (NUTS-2) and counties (NUTS-3), the

correlation coefficients for the strength of relationship

between per capita GDP and per capita GI are 0,96759,

p<0,0001 and 0,92019, p<0,0001 respectively. This confirms

the ability of the latter to substitute for the former. (Fig. 1.)

Figure 1.

Relationship between GDP per capita and gross income (before taxation) GI per capita at NUTS-3 level (counties and Budapest), 2005

Southern Great Plain

Northern Great Plain

Northern-HungarySouthern-Transdanubia

Northern-Transdanubia

Central-Transdanubia

Zala

Veszprém

Vas

Tolna

Szabolcs-Szatmár-Bereg

Somogy

Pest

Nógrád

Komárom-Esztergom

Jász-Nagykun-Szolnok

Heves

Hajdú-Bihar

Győr-Moson-Sopron

Fejér

Csongrád

Borsod-Abaúj-Zemplén

Békés

Baranya

Bács-Kiskun

Hungary

400

450

500

550

600

650

700

1 000 1 200 1 400 1 600 1 800 2 000 2 200 2 400

GDP per capita (1000 HUF)

GI

per

cap

ita

(100

0 H

UF

)

Correlation coefficient: 0,92; p < 0,0001NUTS-3: counties and Budapest.NUTS-2: regions.

Calculation for NUTS-3 only.In terms of values the Central-Hungary region and Budapest are outliers, therefore they cannot be seen in the figure.

5. Calculation of the education index (EI) does not take account of

the literacy of the adult population, because it may be assumed

that the proportion of adults in the developed, and specifically

European, countries who can read and write (adult literacy index)

is nearly a hundred per cent. The qualifications of people who

have passed through primary and secondary enrolment are also

of limited significance3. The proportion of the population 25

years old and older with tertiary educational attainment, i.e. those

with the highest level of skills, is an indicator which has been

found capable of revealing differences in skills among

observational units (including all local administrative units 1).

3 Both adult literacy and primary and secondary enrolment are relevant indicators in less developed countries. There was therefore good reason for using them in the UNDP’s HDI. In developed countries, these indicators, especially adult literacy, are probably irrelevant.

6. Life expectancy at birth expresses mortality in the measured

period regardless of sex and age group. It is the most reliable,

accurate, indirect, standardized indicator of health.

7. The MHDI is given on a conversion scale of 0 to 100 which

combines the component indices representing three segments

of human affairs.

8. In the HCSO study, the MDHI was calculated for the years 2003-6.

The per capita GI was taken for 2005, the proportion of the

population 25 years old and older with tertiary educational

attainment was taken from the 2001 census data, and the life

expectancy at birth was calculated for the years 2003-6.

9. Level of development rankings may be set up for the regions

(NUTS-2), the counties (NUTS-3), the local administrative units-1

(LAU-1) and the Budapest districts (see attached figures 2. 3.).

Figure 2.

Modified Human Development Index (MHDI) in the Local Adminsitrative Units1 (LAU1), 2003–06.

MHDI in per cent

Figure 3.

Modified Human Development Index (MHDI) in the districts of Budapest 2003–06.

MHDI in per cent

10 It is possible to calculate the strength of relationship between

the MHDI, as the independent variable, and various dependent

variables. These latter may be indicators of the political,

economic, demographic, social, cultural, health and physical

environment.

For example, strength of relationship may be quantified between

the MHDI and indicators of party preferences; capital

investment; unemployment; the ageing index; dependency ratio;

fertility; internal migration balance; premature deaths (under the

age of 70); deaths amenable by medical intervention (indirect

indicator of health care effectiveness); cause-specific mortalities

(cancer and cardiovascular mortality); morbidity; environmental

pollution.

11. The MHDI may be used to track the long term development of a

country or countries, regions, counties and local administrative

units-1.

12. One component index of the MHDI, the per capita GI, examines

income inequalities in an ecological context by distinguishing

between local administrative units-1 in the top and bottom

deciles and the top and bottom quintiles, and local administrative

units-1 under the poverty threshold. Consequently the MHDI can

be used to measure social inequalities.

13. The MHDI is more appropriate to measure the well-being of

nations in advanced, particularly European countries, than

the index used by the UNDP, which incorporates aspects

specific to less developed countries. Another advantage

of the MHDI is that fewer data are required to calculate it

than the HDI, and these data are available in every

advanced country.

14. These features of the MHDI make it appropriate for

international comparison of well-being of nations in a

bilateral and multilateral context and among the countries

of the European Union, the OECD and the United Nations

Economic Commission for Europe.

15. The MHDI has its limitations. It measures well-being, education

and longevity with qualified objectivity, but says nothing about

other aspects of human existence. The Human Development

Report (HDR) gives information on this. It is hoped that the MHDI

devised in the HCSO will contribute to production of the HDR.

THANK YOU FOR YOUR ATTENTION!