Computing the HDI


Step 1. Identify the indicators to be used for each HDI component:

health

  • life expectancy

    education

  • functional literacy rate
  • combined primary, secondary and tertiary enrollment rate

    income

  • real income per capita


    • Step 2. Set the appropriate maximum value and the minimum value of each of the above indicators:

     MaximumMinimum
    life expectancy85 yrs.25 yrs.
    functional literacy rate100%0%
    enrolment rate100%0%
    income per capita I*highest in a given yearlowest in a given year
    income per capita II**$40,000
    purchasing power parity    		$100
    purchasing power parity


    * used in the intracountry comparison of provinces
    **used to compare provinces with other countries


    Step 3. Compute the index for each indicator as follows:

    actual value x - minimum value x
    maximum valuex - minimum value x


    Step 4. Average the functional literacy and enrollment indices to generate the education index:

    Education index = (1/2) (functional literacy index + enrollment index)


    Step 5. To arrive at income index I:

    province's real per capita income - minimum income level
    maximum income level - minimum income level


    Step 6. To arrive at income index II:

  • convert a province's per capita income into purchasing power parity as follows:

    PPP$ per capita income (1997) = (peso per capita income/ P30*) x 3.06**

  • then, compute income index II using the following:

    income index II =
    log y - log 100
    log 40,000 - log 100


    * average 1997 peso-dollar exchange rate
    ** implicit ratio of one PPP$ to one current US$ in the 1999 HDR


    • Step 7. Assign weights to the various components to get the HDI:

    HDI (I) – (1/3) life expectancy index + (1/3) education index + (1/3) income index (I)

    HDI (II) – (1/3) life expectancy index + (1/3) education index + (1/3) income index (II)

    Source: 2000 Philippine Human Development Report