RIEB Discussion Paper Series No.2018-18
Title
An Axiomatic Foundation of the Multiplicative Human Development Index
Abstract
The aggregation formula in the Human Development Index (HDI) was changed to geometric mean in 2010. In this paper, we search for a theoretical justification for employing this new HDI formula. First, we find a maximal class of index functions, what we call quasi-geometric means, that satisfy symmetry for the characteristics, normalization, and separability. Second, we show that power means are the only quasi-geometric means satisfying homogeneity. Finally, the new HDI is the only power mean satisfying minimal lower boundedness, which is a local complementability axiom proposed by Herrero, Martinez, and Villar (2010).
Keywords
Human Development Index, Aggregation theory, Geometric mean, Quasi-geometric means, Power means
JEL Classification
D63, I32
Inquiries
Graduate School of Economics, Keio University
Yuta NAKAMURA
Graduate School of Economics, Keio University
Tokyo 108-8345, Japan
Shuhei OTANI
Department of Economics, University of Wisconsin-Madison
*This Discussion Paper won the Kanematsu Fellowship Prize (FY 2017).