Trade-Offs in a Multidimensional Human Development Index

This paper deals with the issue of trade-offs in an aggregate measure of well-being and argues for a simple multi-dimensional human development measure which allows no substitutability among the dimensions. From a theoretical point of view, our index is shown to satisfy desirable normative and statistical properties highlighted by the literature as well as the practical requirements of user-friendliness and simplicity. An alternative that is less stringent for policy is also analysed from the point of view of trade-offs, including a comparison of ‘social’ trade-offs with market trade-offs when the latter are available. We end the paper with two empirical illustrations, at macro and micro levels, comparing our index with other commonly used indices in each context.