Stochastic dominance spanning and augmenting the human development index with institutional quality
Mehmet Pinar1, Thanasis Stengos2, Nikolas Topaloglou3,4
1Business School, Edge Hill University, St Helens Road, Ormskirk, L39 4QP Lancashire UK.
Annals of Operations Research
|August 2, 2022
Summary
This study explored adding governance to the Human Development Index (HDI). Results show that different governance measures impact well-being distributions, affecting overall development assessments.
Area of Science:
- Socioeconomic indicators
- Development economics
- Public policy analysis
Background:
- The Human Development Index (HDI) is a composite measure of education, income, and health.
- Existing HDI dimensions may not fully capture overall well-being.
- There is a need to explore additional indicators for a comprehensive well-being assessment.
Purpose of the Study:
- To investigate the impact of incorporating institutional quality (governance) into the HDI.
- To determine if augmenting the HDI with governance dimensions leads to welfare gains or losses.
- To analyze how different governance indicators affect well-being distributions.
Main Methods:
- Utilized stochastic dominance spanning for analysis.
- Tested the inclusion of various institutional quality indicators within the HDI framework.
- Examined distributional welfare effects of index augmentation.
Main Results:
- The inclusion of institutional quality dimensions significantly alters well-being distributions.
- Differently constructed governance indicators yield distinct distributions of well-being.
- Augmenting the HDI with governance does not consistently lead to uniform welfare gains or losses.
Conclusions:
- Governance is a crucial dimension for a holistic well-being assessment.
- The choice of governance indicator critically influences HDI outcomes and welfare distribution.
- Future HDI refinements should carefully consider the measurement and inclusion of institutional quality.
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