GDP and GNI are often used as indicators of economic welfare. However, there is some dissatisfaction with

Question:

GDP and GNI are often used as indicators of economic welfare. However, there is some dissatisfaction with both as measures of a nation’s overall well-being. During the second half of the 20th century, debates about the various dimensions of economic development led to the creation, in 1990, of a new indicator—the Human Development Index (HDI). First introduced by the United Nations Development Program, an international development agency, it is now widely used to compare well-being across nations.

Comparing country classifications based on GNI per capita and HDI yields interesting results. While the two are strongly correlated, since the HDI already incorporates the GNI, some high-income countries exhibit lower HDI scores than lower-income countries. Norway, a small high-income country, has consistently topped the HDI chart while having a lower gross national income than other countries such as Singapore or Kuwait. However, it neglects important aspects of a country’s well-being, such as human rights or political participation. It also provides only aggregate country-level measures and not the distribution of wellbeing within countries, leading some economists to propose alternatives like a “household-based HDI.”