Regional Development in Advanced Countries: A Within-country Application of the Human Development Index for Austria

Since its implementation in 1990, the human development index (HDI), the flagship indicator of multidimensional development, has attracted a great deal of attention and critics in academic, political and media circles. It initiated a new stage in the discussion of appropriate indicators to measure socioeconomic development. Until now, the vast majority of empirical work using the HDI concept has taken a cross-country perspective. The main aim of this paper is the application of the HDI at the sub-country level in small, highly developed and socioeconomically homogenous countries. For this undertaking we use a slightly modified version of the HDI, called the regional development index (RDI). For the components of the RDI – life expectancy, education and standard of living – we use recent cross section information for Austria at the level of districts. There exists considerable heterogeneity across districts in the RDI and its components. Our Theil-decomposition reveals that the overwhelming part of the observed heterogeneity is based on differences within provinces (96 percent), although the differences in life expectancy between the provinces explain a substantial part of the overall heterogeneity in this indicator (54 percent).