Human Capital Index (HCI) - From Uncertainty to Robustness of Comparisons

Touhami Abdelkhalek and Dorothee Boccanfuso

No 1462, Working Papers from Economic Research Forum

Abstract: In 2019, the World Bank adopted an index developed by Kraay (2018), the Human Capital Index (HCI) (WB, 2019). It combines demographic, education, and health dimensions on a complementary statistical and econometric basis. It is used by the World Bank in the area of human development for monitoring and comparison purposes, in time and space. By construction, the HCI is subject to statistical and econometric uncertainties that are not adequately captured by comparisons and are therefore, not robust. In this paper, we propose a systematic approach taking into account these simultaneous uncertainties using a projection method. We present its practical implementation to construct confidence intervals to the HCI that reflect these uncertainties. It appears that if confidence intervals overlap for two countries or for the same country over time, then comparisons would be inconclusive regardless of the ponctual estimates.

Pages: 25
Date: 2021-02-20, Revised 2021-02-20
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Published by The Economic Research Forum (ERF)

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Related works:
Journal Article: Human Capital Index (HCI) – from uncertainty to robustness of comparisons (2022)
Working Paper: Human Capital Index (HCI) - From Uncertainty to Robustness of Comparisons (2021)
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