Friday, June 26, 2009

Human Development in the United States, Part II

Going above and beyond the call of duty, Mark Sadowski has also created his own human development index. The Advanced Nation Human Development Index, as he calls it, is meant particularly to compare US states to other developmed economies. It uses a different scale than his application of the UN HDI methodology, and it results in a map which, though broadly similar, is not without differences from the map based on UN HDI methodology (note the relative positions of Louisiana and Indiana, for instance):

Advanced Nation Human Development Index Map of the United States

Here's Mark on the methodology he uses for his ANHDI:
On reflection, what I thought what was needed was not an index that is consistent with the UN, as it is designed for comparisons between developing nations, nor even an index based on US standards like the AHDP. What I thought was needed was an index that is designed to compare the US states to the advanced states of the world.

Thus I decided to construct my own index. I have decided to call it the Advanced Nation Human Development Index (ANHDI). I wanted it to be an index that was conceptually consistent with the UNHDI but that would compare the US states with other advanced nations in a manner that was intentionally challenging for the US.

Since it was clear that the life expectancy index was already challenging for the US I saw no need to use a different set of data for the health component. Life expectancy data for the US states and the advanced nations is from the year 2005 and comes from the AHDP and the UN HDI. For the education index it was also clear that there were a number of advanced nations that led on the gross enrollment index. Thus I decided to base the education index solely on combined enrollment data. Combined enrollment data for the US states is calculated in the same fashion as described previously. Combined enrollment data for the advanced nations comes from the UNHDI. All life expectancy data is for the year 2005.

The US easily leads almost the entire world in terms of GDP per capita but much of this lead is due to the fact that Americans simply work longer hours than people in other advanced nations. Thus it seemed to me that a more appropriate measure of standard of living would be GDP per hour worked or productivity. The OECD already computes such numbers for its thirty member nations and the most recent data available was for the year 2007. Productivity data for 20 additional nations was available from the Human Conference Board website. Unfortunately, although it was consistent with the OECD data in other respects, their PPP GDP data was not equivalent to OECD data. Since the most similar data to the OECD PPP GDP data is from the IMF, I adjusted the Human Conference Board’s productivity data using IMF data. I used 2007 data in order to be consistent with the OECD.

To come up with estimates of productivity for the US states I had a slightly greater challenge. The method for calculating productivity involves calculating GDP per employed person and then dividing that by the average number of hours worked per employed person. Employed person data used by the OECD (and the Human Conference Board) is not consistent with the usual data. For the US as a whole it is greater by a factor of 1.0529. To come up with an estimate of the state level employed person data that was equivalent to OECD data I multiplied state level employed person data taken from the Census Bureau by 1.0529.

State level data on the average number of hours worked per employed person is not released by the BLS. As a proxy I used state level average manufacturing work week data from the BLS website and adjusted the national level average hours worked per employed person estimated by the OECD. This should be a good estimate since manufacturing workers are a subset of all employed persons and casual inspection of the data reveals patterns that are consistent with expectations (e.g. Alaskans and Kansans probably do work longer hours). Again all data was for 2007 to be consistent with the OECD and the Human Conference Board.

The final step was to come up with formulas for each of the three index components. Like the UN HDI all three indices were computed as a ratio of differences. Unlike the UN HDI index I chose not to take the log of the standard of living data. This was because differences in standard of living among the advanced nations is not as great as among all nations and it also served my admitted purpose of making the index more challenging to the US states. I chose upper and lower bounds for each of the three data sets based on a little trial and error (again with this purpose in mind) and in the process I found it necessary to drop 19 nations for which I had productivity data because they performed below the minimum level of one or more of the indices. The overall ANHDI score is simply the average of the three indices.
Here are those formulas:

Life Expectancy Index = (life expectancy – 73)/(83-73)

Education Index = (combined enrollment rate – 76)/(113-76)

Economic Index = (GDP per hour worked as % of US – 42)/(143-42)

Mark calculates the ANHDI for other developed nations, which yields this ranking, with US states interposed:

1. Norway - .717
2. Australia - .709
Connecticut - .685
New York - .680
Hawaii - .666
Massachusetts - .660
DC - .639
California - .626
New Jersey - .617
Delaware - .603
3. Ireland - .598
4. France - .596
5. Netherlands - .588
Alaska - .588
6. Iceland - .578
7. Luxembourg - .573
Rhode Island - .564
Minnesota - .561
8. Belgium - .555
9. Sweden - .552
10. Spain - .552
11. New Zealand - .548
12. Finland - .537
Maryland - .532
Illinois - .531
Colorado - .525
13. Denmark - .521
Virginia - .514
New Hampshire - .511
Washington - .509
14. Canada - .503
Wyoming - .501
15. United States - .496
Texas - .493
Vermont - .491
16. Austria - .485
North Dakota - .483
Wisconsin - .481
17. United Kingdom - .476
Oregon - .474
Iowa - .473
Florida - .472
Nebraska - .471
New Mexico - .468
18. Switzerland - .468
Utah - .468
19. Japan - .467
20. Germany - .467
Pennsylvania - .465
Michigan - .463
21. Italy - .461
North Carolina - .455
22. Greece - .445
Arizona - .443
Kansas - .431
Nevada - .424
Georgia - .414
Ohio - .413
Maine - .412
23. Taiwan - .407
Louisiana - .403
South Dakota - .402
24. Singapore - .390
Indiana - .390
Missouri - .379
Idaho - .372
Montana - .363
25. Hong Kong - .353
Oklahoma - .351
Kentucky - .342
South Carolina - .330
Tennessee - .330
26. South Korea - .330
Arkansas - .320
27. Slovenia - .319
Alabama - .314
28. Portugal - .300
West Virginia - .299
Mississippi - .257
29. Barbados - .228
30. Czech Republic - .163
31. Slovakia - .098

Mark concludes:
Keeping in mind that productivity data was not available for more than fifty nations, nevertheless what I think the ANHDI shows is the following. There are at least 28 nations, mostly in Western Europe, East Asia and Oceania that perform at a level, by the standards of ANHDI, above the worst performing US state. In addition as a whole the US ranks 15th on the ANHDI, not only behind the twelve nations that lead it on the UNHDI, but also behind Spain, Denmark and Luxembourg. I hope it will be eye opening to Americans as they see how their country and their state compares with the other advanced nations of the world as well as the other states by this standard.
Huge thanks again to Mark for all his work on this topic. All the statistical work is entirely his, and goes way beyond anything I would be able to do.


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