A Conceptual Framework for Measuring Human Development in a High-income Country

1. A Conceptual Framework for Measuring Human Development in a High-income Country Francesco Burchi and Pasquale De Muro Roma Tre University

2. Introduction • The objective of the paper is to identify a conceptual framework to measure human development in a high income country in order to identify territorial disparities and tailor policies • In particular, this means to: • Clarify the theoretical structure and define accordingly the concepts (wellbeing, HD) • Select the relevant dimensions within a multidimensional setting (not discussed here) • Select the relevant categories of indicators (input? Output? Outcome? Impact?)

3. The CA and Measurement issues /1 • Various concepts: HD, capability, functioning, agency, well-being, freedom,… • What should we measure? • HD is a “paradigm” (Haq, 1995) and is about building/expanding capabilities • The CA is a theoretical framework (Robeyns, 2011) • The CA is the theoretical foundation of the HD paradigm

4. The CA and Measurement issues /2 • Functioning or capabilities? • her achieved (valuable) functionings; • capabilities: the various combinations of valuable functionings she can achieve • Sen: the evaluative focus on the CA can be either on the achieved functionings (AF) or the capability set (CS) of alternatives • Focus on AF⇒measurement of well-being ⇒ well-being∈human development • Focus on CS⇒measurement of substantial freedoms • Human development ⊃ well-being ∪ freedom

5. The CA and Measurement issues /3 • The choice between AF and CS depends on: • objective • accessible information • Usually, statistical systems include information on AF but not on CS • measuring CS: only ad hoc surveys • A plenty of information on AF, used also for measuring WB.

6. The CA and Measurement issues /4 • However, most well-being studies suffer from 3 interrelated shortcomings: • they do not have a sound theoretical foundation, and often do not give a clear and rigorous definition of well-being and its dimensions; • indicators are assembled and utilized on purely empirical basis, thus they simply reflect data availability and “conventional wisdom”; • they fail to make the relevant distinction between “means” and “ends” of human development.

7. Categorization of socio-economic indicators • Scattered literature dealing with the “categorization” of indicators, i.e. with specific features that indicators should have in order to represent a phenomenon • Economic literature: production function (output-input relationship) • The output/input ratio is the core of the efficiency analysis

8. Input-output dichotomization /1 • Input-output classification also in impact evaluation handbooks and documents • Input indicators = resources allocated to the construction of a school or a hospital, while output indicators are more concerned with the number of schools and hospitals constructed, and the number of pupils attending school • Financing agencies often limit their work to “controlling and measuring the inputs and immediate outputs of a program—how much money is spent, how many textbooks are distributed—rather than on assessing whether programs have achieved their intended goals” (Gertler et al., 2011, p. 3)

9. Input-output dichotomization /2 • Same distinction in the literature on measurement of wellbeing and other socio-economic phenomena (Dasgupta, 1990; Giovannini et al., 2008; Booysen, 2002; Adelman and Morris, 1972) • Giovannini et al. (2008) indicate the steps for the construction of composite indicators. The 1st concerns the identification of a “theoretical framework”, consisting of: • Conceptual apparatus to define the phenomenon • Selection of dimensions (not treated here) • Choosing whether to use input, output or “process” indicators….“too often composite indicators include both input and output measures” (Giovannini et al., 2008, p. 22).

10. Dichotomization means-ends • Debate on development indicator: input=means of development, output=ends (Booysen, 2002). • Some authors argue that composite development indicators should point on either means or ends (e.g., Adelman and Morris, 1972), while others like McGranahan et al. (1972) claim that these variables should all focus on intended ends (or outputs). • Beside some differences, they are in line with the recommendations of OECD

11. Extension of categories • Move beyond the strict dichotomization • Convergence on categorization: input, output, outcome and impact indicators (Gertler et al., 2011; Save the Children UK, 2008; Vos, 1996; Mandl et al., 2008; UNDP, 2010). • Monitoring is more concerned with input and output, while evaluation with outcome and impact • “The monetary and non-monetary resources deployed (i.e. the input) produce an output. For example, education spending .” In contrast, “Effectiveness relates the input or the output to the final objectives to be achieved,..the outcome.” Finally, impact indicators refer to the potential effects on other issues (Mandl et al., 2008) • “it is best to think of a chain of indicators” (Vos, 1996)

12. An example of categorization EDUCATIONAL INDICATORS: Input indicators: public and private expenditures in education, school resources (monetary input), number of teachers and students (their ratio can be itself conceived as an input indicator of the quality of education), class size and instruction, teaching material; quality and adequacy of curriculum; Output indicators: Enrolment rate; attendance rate; dropout rate, and repetition rate (also defined as measures of “access” to education); Outcome indicators: Completion rates (in between output and outcome indicator); Literacy rates; expected number of completed years of schooling, standardized test measures of student and adult achievement in terms of literacy and numeracy); Impact indicators: earnings/wages, employment/unemployment rate, nutritional indicators, health indicators

13. Measuring functionings in some relevant HD dimensions /1 • Following the OECD guidelines and using the CA as theoretical framework how do we measure well-being? Should we use input, output, outcome or impact indicators? • The HDI – both old and new– includes input indicators (GDP/GNI), output indicators (e.g., combined gross enrolment rate), as well as outcome indicators (e.g., life expectancy at birth). • Why this incoherence? Objective of the paper (cross country comparison), data availability, strategic reasons (simplicity and immediate comparison with GDP)

14. Measuring functionings in some relevant HD dimensions /2 • “There are two ways to assess how well people live. One is to consider to what extent the country provides conditions deemed essential for a good life. In this approach the emphasis is on societal input… The other approach is to assess how well people thrive. In this approach the emphasis is on output” (Veenhoven) • “First is the emphasis on people, on what they value as important for their daily life, and on the environment in which they develop...This perspective also implies focusing on the “ends” of various human activities, while recognizing that their achievement can matter both intrinsically and instrumentally” (Stiglitz et al., 2009: 144).

15. Outcome – Output – Input and the second best • In addition to being incoherent with CA framework, the use of input indicators has 2 weaknesses: (1) it assumes a straightforward relationship between means and outcomes; (2) it does not leave each country the possibility to identify their way to enhance people’s wellbeing (Chibber and Laajaj, 2007). • If we don’t have data on outcomes, e.g. competencies/abilities in education (like PISA tests)? proxy measures (or output indicators), such as enrolment or attendance rate (Giovannini et al., 2008). • Highlight the limitations: “indicators of school enrolment inform about access to education, but they may provide a misleading picture of outcomes if schools do not provide effective instruction” (Stiglitz et al., 2009, p. 167).

17. A further distinction: Stocks vs. Flows • The new HDI includes both stocks (mean years of schooling), flows (GNI), and “two expectations of stock variables conditional on current flows (life expectancy and expected years of schooling)” • One critique to HDI: “the outcomes of past efforts rather than the effects of present or recent policy changes” (Kovacevic, 2010, p. 6). • What is the final goal of a wellbeing indicator? • If, as in most of the cases, is to offer a static picture of people’s life conditions, is it really a problem if it measures “the outcomes of past efforts”? NO. • If it is to make a prompt evaluation of the impact of a policy, we need to revise the traditional indicator. Focus on flows