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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

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  1. Measuring and Fostering the Progress of Societies:A New Approach for CIS and Eastern European CountriesMoscow, 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

  2. 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?”

  3. 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.

  4. 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.

  5. 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 oldandolder with tertiary educational attainment (PATE) – Life expectancy at birth. 3. Each component has equal weight in the composite index.

  6. 4. The GIPC was chosen in preference to GDP per capita (usedby the UNDP) because it is available every year in localadministrative units-1, Budapest districts and even thesmallest villages (local administrative units-2), whereas GDP is calculated only for countries, regions and counties. At thelevel of regions (NUTS-2) and counties (NUTS-3), thecorrelation coefficients for the strength of relationshipbetween 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.)

  7. Figure 1. Relationship between GDP per capita and gross income (before taxation) GI per capita at NUTS-3 level (counties and Budapest), 2005

  8. 5.Calculation of the education index (EI) does not take account ofthe literacy of the adult population, because it may be assumedthat 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 whohave passed through primary and secondary enrolment are alsoof limited significance3. The proportion of the population 25years old and older with tertiary educational attainment, i.e. thosewith the highest level of skills, is an indicator which has beenfound capable of revealing differences in skills amongobservational units (including all local administrative units 1). 3Both 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.

  9. 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 whichcombines the component indices representing three segments ofhuman affairs.

  10. 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 thepopulation 25 years old and older with tertiary educationalattainmentwastakenfrom the 2001 census data, and the lifeexpectancy at birthwas 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.).

  11. Figure 2. Modified Human Development Index (MHDI) in the Local Adminsitrative Units1 (LAU1), 2003–06.

  12. Figure 3. Modified Human Development Index (MHDI) in the districts of Budapest 2003–06.

  13. 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.

  14. 11. The MHDI may be used to track the long term development of acountry or countries, regions, counties and local administrativeunits-1. 12. One component index of the MHDI, the per capita GI, examinesincome inequalities in an ecological context by distinguishingbetween local administrative units-1 in the top and bottomdeciles and the top and bottom quintiles, and local administrativeunits-1 under the poverty threshold. Consequently the MHDI canbe used tomeasure social inequalities.

  15. 13. The MHDI is more appropriate to measure the well-being ofnations in advanced, particularly European countries, thanthe index used by the UNDP, which incorporates aspectsspecific to less developed countries. Another advantageof the MHDI is that fewer data are required to calculate itthan the HDI, and these data are available in every advanced country.

  16. 14. These features of the MHDI make it appropriate forinternational 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 NationsEconomic Commission for Europe.

  17. 15. The MHDI has its limitations. It measures well-being, educationand longevity with qualified objectivity, but says nothing aboutother aspects of human existence. The Human DevelopmentReport (HDR) gives information on this. It is hoped that the MHDIdevised in the HCSO will contribute to production of the HDR.

  18. THANK YOU FOR YOUR ATTENTION!

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