An Assessment of the Measurement Properties of the Human Development Index

One of the more important determinants of the competitiveness of a nation is the quality of its human capital. The Human Development Index (HDI) is the most widely used yardstick of human development. It measures human development for all the countries of the world, through the use of three factors – longevity, knowledge and GDP measured in purchasing power. This paper evaluates HDI's contribution towards measuring the quality of the human capital component of a nation's competitiveness. Two primary issues under study are the HDI's information properties vis-a-vis its components and its measurement properties as an index. The primary conclusion of the study is that the HDI carries useful information about a country's current development, but not about the future level of development. Hence, further refinements in its construction as well as additional theoretical support as a quantitative measure are needed.