Economics Hdi Questions Medium
The Human Development Index (HDI) takes into account income distribution by incorporating a component called the Inequality-adjusted HDI (IHDI). The IHDI is a measure that adjusts the HDI to reflect the disparities in income distribution within a country.
To calculate the IHDI, the HDI considers not only the average income or GDP per capita but also the distribution of income among the population. It takes into account the extent of inequality in income distribution, giving more weight to countries with more equal income distribution.
The IHDI uses a formula that adjusts the HDI based on the Gini coefficient, which is a commonly used measure of income inequality. The Gini coefficient ranges from 0 to 1, with 0 representing perfect equality and 1 representing extreme inequality. By incorporating the Gini coefficient into the calculation, the IHDI penalizes countries with higher income inequality, resulting in a lower IHDI score.
In summary, the HDI accounts for income distribution through the Inequality-adjusted HDI (IHDI), which adjusts the HDI based on the Gini coefficient to reflect the disparities in income distribution within a country. This allows for a more comprehensive assessment of human development by considering not only average income but also the distribution of income among the population.