Methodological issues in the construction of composite indices : a case study of the human development index

Abstract

This chapter looks at a number of methodological issues relating to the construction of composite indices. It does so by looking at the Human Development Index (HDI), one of the most widely used and arguably best known achieved national composite human well-being index. The challenges faced in constructing the HDI are generic to composite indices in general. After providing an overview of the index and its scores for various countries, this chapter provides a critical evaluation of the HDI. Among the issues considered are the choice of components, index structure, weighting of individual components, transformation of constituent variables and correlations among components. One of the main points made in the chapter is that while there is a need to ensure that the HDI is comparable across countries and over time, there is also a need to ensure that it is relevant to current circumstances, both global and local. The combining of indicators of so-called objective well-being, like the HDI, with measures of subjective well-being is also considered.