Abstract:
This study makes the case that economic uncertainties—i.e., the extent to
which economies face systemic uncertainties—need to be considered another
dimension of human development because they render development vulnerable,
diminish social welfare, and constrain human capabilities. We propose a
methodology for adjusting the human development index (HDI) for economic
uncertainties, using the time variability of income changes as a proxy. We
construct an adjusted index associated with the income component for the 2011
HDI. Our analysis indicates that such an index contains additional information.
The percentage loss in the income component of the HDI seems to reflect the
variability in economic indicators arising from the political and economic
tribulations experienced by each country. In Pakistan’s case, the results of a timeseries
analysis of the percentage loss from the uncertainty adjustment appear to
closely trace the country’s political and economic upheavals.
