2021/42 | LEM Working Paper Series | ||||||||||||||||
On Some Problems of Using the Human Development Index in Economic History |
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Nicola Amendola, Giacomo Gabbuti and Giovanni Vecchi |
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Keywords | |||||||||||||||||
Human development index; economic wellbeing; composite indices;
living standards; social welfare functions; Italy.
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JEL Classifications | |||||||||||||||||
N01, N3, O15
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Abstract | |||||||||||||||||
The Human Development Index (HDI) has attracted increasing interest among economic historians
during the last 30 years. This paper provides a theoretical framework that shows that the HDI is
equivalent to a paternalistic social welfare function: this implies that all alternative HDI formulas
used by economic historians are a representation of their ethical systems. The problem is neither the
choice of the dimensions included in the HDI, nor the choice of the weighting scheme, but the lack
of consistency with standard economic theory. A key consequence is that with HDI, 'anything goes'.
Using Italy 1861-2016 as a case study, we show how given the same data, and identical choices for
the dimensions and weights defining the HDI, the interpretation of the Italians' living standard long-run
evolution is entirely driven by the analyst's preferences. We conclude speculating on possible
solutions to reconcile the use of HDI to assist historical analysis.
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