Construction of a Statistical Index as a Measure of a Country’s Multidimensional Development

Abstract

Economic growth is expected to enhance the policies for poverty reduction and other social problems. But it is not always the case; economic growth does not necessarily reflect human development. This situation can be answered by the fact that economic growth is commonly measured by GDP. Because of this, researchers have formulated different indices that assess economic and human development. The human development index (HDI) measures the basic dimensions of human development and does not consider other indicators of development. This paper aims to construct an alternative measure of a country’s performance using the Millennium Development Goals (MDG) indicators. Initial variables that were considered in the study are the different indicators for monitoring the progress of the eight MDGs. The analysis of data considered only a specific year that has the most number of available indicators. Variables were then subjected to principal component analysis to reduce their dimensionality. The identified principal components with high loadings were used in the construction of the statistical index as an alternative measure of development. Bootstrap samples were generated to check the statistical properties of the index such as unbiasedness, precision, accuracy, and consistency. The proposed index, the Multidimensional Development Index (MDI) which is composed of 11 indicators, was found to possess desirable characteristics of an estimator. This index encompasses development through eradicating extreme poverty and hunger, reducing child mortality, improving maternal health, ensuring environmental sustainability, and developing a global partnership for development.