Consequences of Data Error in Aggregate Indicators: Evidence from the Human Development Index

Hendrik Wolff (), Howard Chong () and Maximilian Auffhammer

No 3346, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper examines the consequences of data error in data series used to construct aggregate indicators. Using the most popular indicator of country level economic development, the Human Development Index (HDI), we identify three separate sources of data error. We propose a simple statistical framework to investigate how data error may bias rank assignments and identify two striking consequences for the HDI. First, using the cutoff values used by the United Nations to assign a country as ‘low’, ‘medium’, or ‘high’ developed, we find that currently up to 45% of developing countries are misclassified. Moreover, by replicating prior development/macroeconomic studies, we find that key estimated parameters such as Gini coefficients and speed of convergence measures vary by up to 100% due to data error.

Keywords: international comparative statistics; measurement error (search for similar items in EconPapers)
JEL-codes: C82 O10 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2008-02
New Economics Papers: this item is included in nep-dev
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Citations: View citations in EconPapers (2)

Published - published as 'Classification, Detection and Consequences of Data Error: Evidence from the Human Development Index' in: Economic Journal, 2011, 121 (553), 843 - 870

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Working Paper: Consequences of Data Error in Aggregate Indicators: Evidence from the Human Development Index (2008)
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