Development indices, inequality, and applied development policy analysis: some issues for discussion

Critiques of standard one-dimensional development indices are gaining momentum. The Human Development Index and the Human Development Index Adjusted for Inequality are two of the most well known multidimensional alternative indices. However, questions arise regarding their usefulness for policy analysis at a macro development level. In this paper, I analyze those questions from the perspective of an applied development policymaker who tries to perform exercises in intertemporal policy analysis. In Sections 1 and 2 I discuss the standard and human development indices of development and inequality. In Section 3 I present the standard goals, models and tools used in applied macro development policy analysis and I analyze some possible extensions toward the Human Development approach. Finally, in Section 4 I discuss some other issues that the Human Development approach should address to compete for a relevant role in the applied development policymaker toolbox.