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Econ. of Scale(1)
Income Elasticity
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Econ. of Scale(2)
Lorenz Curve
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Home Field Trips Rural Life and Agriculture Tour Composite Indicators of Poverty and Living Standards

Theories

Composite Indicators of Poverty and Living Standards

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Development is more than simply increasing economic output i.e.GDP per capita. It is a wider concept than economic growth. Even if a country's economy experiences real growth of GDP it does not mean that economic development is taking place. Nevertheless, wider more meaningful indicators of development are often correlated with GDP per capita.

There are a number of single indicators that can be used to measure the extent to which the inhabitants of a country are experiencing poverty. These all focus on one area; either health, education, or income. A number of composite indicators have been developed that allow several indicators to be aggregated together to give a more general measure of poverty and living standards.

The Physical Quality of Life Index (PQLI)
In this index three single indicators were combined together; life expectancy at birth, infant mortality and literacy rates. For each indicator the performance of individual countries were rated on a scale of 1 to 100 where 1 represents the worst and 100 the best. There was a correlation with the GDP per capita however it was not as close as might be expected.

The Human Development Index (HDI)
This index, produced by the United Nations Development Programme (UNDP), includes indicators of longevity, knowledge and income. It combines life expectancy (at birth), an average of literacy rates and number of years of education and GDP expressed in terms of its purchasing power in the domestic economy. Some countries have shown rapid economic growth but have not shown correspondingly high HDI index.

The Human Suffering Index (HIS)

The index ranks people according to the level of human suffering based on 10 measures

• Life expectancy
• Daily calorie supply
• Access to clean water
• Infant immunisation
• Secondary school enrolment
• Per capita GDP
• Rate of inflation
• Communications
• Technology
• Political freedom
• Civil rights

Human Poverty Index

The United Nations defines poverty as the "denial of choices and opportunities most basic to human development-to lead a long healthy, creative life and enjoy a decent standard of living, freedom, self esteem and the respect of others"

Whilst the Human Development Index measures the progress of the country in achieving development the Human Poverty Index is more aimed at reflecting on how the progress is distributed and the level of deprivation and poverty being experienced in the country. There are two HPI indices most commonly used. HPI-1 is a measure of absolute poverty used in Less Developed Countries and HPI-2 is a measure of relative poverty used in More Developed Countries.

HPI-1 measures poverty in Less Developed Countries. The variables used are:

• the percentage of people expected to die before age 40
• the percentage of adults who are illiterate
• deprivation in overall economic provisioning-public and private-reflected by the percentage of people without access to health services and safe water and the percentage of underweight children under five.

HPI-2 measures human poverty in industrial countries. Because human deprivation varies with the social and economic conditions of a community, this separate index has been devised for industrial countries. It focuses on deprivation in the same three dimensions as HPI-1 although with an adjusted set of criteria and one additional one, social exclusion measured by low incomes and long term unemployment.

The variables are the percentage of people likely to die before age 60, the percentage of people whose ability to read and write is far from adequate, the proportion of people with disposable incomes of less than 50% of the median and the proportion of long-term unemployed (12 months or more).

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