Advertisement

Social Indicators Research

, Volume 127, Issue 3, pp 959–981 | Cite as

Classifying Human Development with Latent Class Analysis

  • Ann L. OwenEmail author
  • Julio Videras
Article

Abstract

We use latent class analysis to create an indicator of human development that integrates a broad range of country characteristics including per capita income, health, inequality, environmental performance, and life satisfaction. We show that each of these characteristics is important in distinguishing across development experiences. Because latent class analysis is model-based and allows us to test the significance of each aspect of development and the number and size of the groupings, this approach is superior to an index that divide countries into ad hoc equally-sized groups. Our results suggest that income per capita does not, by itself, capture all of the important dimensions of development and that a rank-ordering of development experiences may not always be appropriate.

Keywords

Long-run growth Standard of living Human development index Finite mixture model 

JEL Classifiacation

O4 I3 

Notes

Acknowledgments

We are grateful for helpful comments from Lewis Davis.

References

  1. Acemoglu, D., Johnson, S., & Robinson, J. (2001). Colonial origins of comparative development: An empirical investigation. American Economic Review, 91(5), 1369–1401.CrossRefGoogle Scholar
  2. Alfo, M., Giovanni, T., & Robert, J. W. (2008). Testing for country heterogeneity in growth models using a finite mixture aproach. Journal of Applied Econometrics, 23, 487–514.CrossRefGoogle Scholar
  3. Berenger, V., & Verdier-Chouchane, A. (2007). Multidimensional measures of well-being: Standard of living and quality of life across countries. World Development, 35(7), 1259–1276.CrossRefGoogle Scholar
  4. Bloom, D. E., David, C., & Jaypee, S. (2003). Geography and poverty traps. Journal of Economic Growth, 8, 355–378.CrossRefGoogle Scholar
  5. Booysen, F. (2002). An overview and evaluation of composite indices of development. Social Indicators Research, 59, 115–151.CrossRefGoogle Scholar
  6. Easterly, W. (1999). Life during growth. Journal of Economic Growth, 4(3), 239–276.CrossRefGoogle Scholar
  7. Easterly, W, & Levine, R. (1997). Africa’s growth tragedy: Policies and ethnic divisions. Quarterly Journal of Economics, 112(4), 1203–1250.CrossRefGoogle Scholar
  8. Hirschberg, J. G., Moussoumi, E., & Slottje, D. J. (1991). Cluster analysis for measuring welfare and quality of life across countries. Journal of Econometrics, 50(1–2), 131–150.CrossRefGoogle Scholar
  9. Kerekes, M. (2012). Growth miracles and failures in a markov switching classificaiton model of growth. Journal of Development Economics, 98, 167–177.CrossRefGoogle Scholar
  10. Knack, S., & Keefer, P. (1997). Does social capital have an economic payoff? A cross-country investigation. Quarterly Journal of Economics, 112(4), 1251–1288.CrossRefGoogle Scholar
  11. Levine, R., & Renelt, D. (1992). A sensitivity analysis of cross-country growth regressions. American Economic Review, 82(4), 942–963.Google Scholar
  12. Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42.CrossRefGoogle Scholar
  13. Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A contribution to the empirics of economic growth. Quarterly Journal of Economics, 107(2), 407–437.CrossRefGoogle Scholar
  14. McGillivray, M. (2005). Measuring non-economic well-being achievement. Review of Income and Wealth., 51(2), 337–364.CrossRefGoogle Scholar
  15. Owen, A. L., & Videras, J. (2009). Reconsidering social capital: A latent class approach. Empirical Economics, 37(3), 555–582.CrossRefGoogle Scholar
  16. Owen, A. L., Videras, J., & Davis, L. (2009). Do all countries follow the same growth process? Journal of Economic Growth, 14(4), 265–286.CrossRefGoogle Scholar
  17. Paap, R., Franses, P. H., & van Dijk, D. (2005). Does africa grow slower than asia, latin america and the middle east? Evidence from a new data-based classification method. Journal of Development Economics, 77, 553–570.CrossRefGoogle Scholar
  18. Sen, A. (1985). Commodities and capabilities. Amsterdam: North Holland.Google Scholar
  19. Slottje, D. J. (1991). Measuring the quality of life across countries. Review of Economics and Statistics, 73(4), 684–693.CrossRefGoogle Scholar
  20. Skrondal, A., & Rabe-Hesketh, S. (2004). Generalized latent variable modeling: Multilevel, longitudinal and structural equation models. Boca Raton, FL: Chapman & Hall/CRC.Google Scholar
  21. Vermunt, J. K., & Magidson, J. (2005). Latent GOLD 4.0 user’s guide. Belmont, MA: Statistical Innovations.Google Scholar
  22. Wolff, H., Chong, H., & Auffhammer, M. (2011). Classification, detection and consequences of data error: Evidence from the human development index. The Economic Journal, 121, 843–870.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  1. 1.Hamilton CollegeClintonUSA

Personalised recommendations