Inequality Assessment by Probabilistic Development Indices

This paper analyses the Human Development Index (HDI) time series from 2010 to 2017. An alternative index is studied, which combines the same components of the HDI by means of the joint probability of reaching the lower frontier. Another index combines these partial components with four other components that access different dimensions of inequality. This probabilistic approach has the advantage of allowing the index to be extended with an unlimited number of quality-of-life dimensions. The focus on the lower frontier also allows one to assign higher values to variations away from the extreme poverty than to variations within extremely high well-being. The consistency of HDI and of the inequality-corrected HDI is confirmed. Moreover, this work demonstrates that the probabilistic approach allows the use of the same principle to evaluate, in a consistent way, a large number of dimensions. The evolution of 4-year averages is also analyzed.