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Analysis of Development Performance Using a Development Index Based on Factor Analysis (Old Title- Constructing Multideminsional Indexes of Economic Structure and Development)

K. Renuka Ganegodage, Alicia Rambaldi (), D.S. Prasada Rao and Kam Ki Tang ()

No WP052006, CEPA Working Papers Series from University of Queensland, School of Economics

Abstract: Development involves changes in social, economic and institutional structures. Quantifying development requires a large array of variables with different characteristics often highly correlated. A factor analysis approach using inferential decisions based on computed standard errors is proposed. The significant factors are used to construct sub-indexes of structural characteristics and a new development index (DI). The properties of DI are analysed and contrasted with more traditional measures, real per capita income (RIPC) and the Human Development Index (HDI). The methodology is applied to data on 45 variables for 97 countries for 1995-2004. DI is found to have stronger discriminating power.

Date: 2006
New Economics Papers: this item is included in nep-geo, nep-mic and nep-ure
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