The Physical Quality of Life Index (PQLI) was deliberately designed to:

Avoid needing income data, using literacy, infant mortality and life expectancy instead

Replace HDI entirely after 2010

Since the 2010 methodology revision, the HDI combines its three dimension indices using:

A geometric mean, which penalises a very poor performance in any one dimension

A simple arithmetic mean with no penalty for imbalance

Only the income dimension, ignoring health and education

Compared to the Millennium Development Goals (MDGs), the Sustainable Development Goals (SDGs) are:

Broader (17 goals) and universal, applying to every country rather than developing countries alone

Narrower, with fewer goals than the MDGs

Focused solely on developed countries

The headcount ratio of poverty, unlike the poverty gap index, fails to capture:

The depth of poverty — how far below the poverty line the poor actually are

The total population of a country

A Gini coefficient of 0 represents:

Perfect equality — the Lorenz curve coincides with the diagonal

Kuznets's 'inverted-U' hypothesis proposes that, as an economy develops, inequality:

First rises during early industrialisation, then falls as development matures

Falls continuously from the very start of development

Is unrelated to industrialisation

Amartya Sen's capability approach reframes development as:

The expansion of people's real freedoms/capabilities to lead the lives they value, not income alone

Only the growth of per-capita GNP

A fixed poverty line applied uniformly worldwide

Indicators of Economic Development, Poverty and Inequality, and Social Sector Development

This chapter closes Unit 8 with how development is actually measured beyond income alone — composite indicators, poverty and inequality measurement, and the health, education and gender dimensions of social sector development.

1. Indicators of Economic Development: PQLI, HDI and SDGs

The Physical Quality of Life Index (PQLI), devised by Morris D. Morris, was an early alternative to per-capita GNP: a simple, equally-weighted average of three normalised (0-100) indicators — literacy rate, infant mortality rate, and life expectancy at age one — deliberately chosen to avoid needing income data at all and to capture BASIC NEEDS achievement directly. The Human Development Index (HDI), introduced by the UNDP, broadened this further into three dimensions — a long and healthy life (life expectancy), knowledge (mean years and expected years of schooling), and a decent standard of living (GNI per capita, PPP-adjusted) — combined, since the 2010 methodology revision, as a GEOMETRIC (not arithmetic) mean of the three normalised dimension indices, which penalises a very poor performance in any ONE dimension more severely than an arithmetic average would (an extremely low score on one dimension cannot be fully compensated for by a very high score on another).

ℹ️ From MDGs to SDGs

The Millennium Development Goals (MDGs, 2000-2015) set eight goals focused chiefly on developing countries — poverty, hunger, education, gender, child/maternal health, disease, environment and a global partnership. The Sustainable Development Goals (SDGs, 2015-2030) succeeded them with 17 goals, deliberately broader and UNIVERSAL — applying to every country, not developing countries alone — and explicitly integrating environmental sustainability alongside social and economic objectives, reflecting a shift from a narrower poverty-reduction agenda to a comprehensive sustainability framework.

2. Poverty: Concepts and Measurement

ABSOLUTE poverty is measured against a fixed poverty line — a minimum income or consumption expenditure needed for basic needs; RELATIVE poverty is measured against the prevailing standard within a society (e.g. a fraction of median income), so it can persist even as absolute living standards rise across the board. The HEADCOUNT RATIO (the proportion of the population below the poverty line) is simple but says nothing about how far below the line the poor actually are; the POVERTY GAP INDEX corrects this by measuring the average shortfall of the poor's income/consumption from the poverty line, capturing DEPTH of poverty that the headcount ratio ignores. The Multidimensional Poverty Index (MPI, Alkire-Foster method) goes further still, identifying a person as poor if they are simultaneously deprived across multiple indicators spanning health, education and living standards — capturing deprivations a purely income-based poverty line can miss entirely.

3. Inequality: Lorenz Curve, Gini Coefficient and the Kuznets Hypothesis

The Lorenz curve plots the cumulative percentage of income against the cumulative percentage of population (ordered from poorest to richest); PERFECT equality is the 45-degree diagonal (the bottom x% of the population always holds exactly x% of income), and the curve bows further BELOW the diagonal as inequality rises. The Gini coefficient formalises this: the ratio of the area between the Lorenz curve and the diagonal to the ENTIRE area under the diagonal, ranging from 0 (perfect equality) to 1 (perfect inequality, one person holding all income). Simon Kuznets's famous 'inverted-U' hypothesis proposed that inequality first RISES during early industrialisation (as labour shifts from low-inequality traditional agriculture into a higher-inequality, higher-productivity modern sector) and then FALLS as development matures and the modern sector absorbs most of the workforce — an empirical pattern observed historically in some economies but strongly contested and far from universal in later cross-country evidence.

⚠️ A higher Gini means MORE inequality, not less

A frequent slip is reversing the direction: a Gini coefficient of 0 is PERFECT EQUALITY (Lorenz curve coincides with the diagonal, no gap at all), and a Gini of 1 is MAXIMUM inequality (the Lorenz curve sags all the way to the bottom before shooting up, meaning the entire area under the diagonal is 'gap'). A rising Gini over time therefore means inequality is WORSENING, and comparing two countries' Gini coefficients directly tells you which has the more unequal income distribution — a bigger number is always the more unequal one.

4. Social Sector Development: Health, Education and Gender

Health as both means and end — indicators like infant/maternal mortality and life expectancy are development OUTCOMES in their own right, and simultaneously an INPUT into future productivity and growth (a healthier workforce is a more productive one) — health investment is therefore doubly justified rather than a pure welfare cost.
Education and human capital — literacy and enrolment ratios measure access, but the economically central concept is the RETURN to education (higher lifetime earnings from an additional year of schooling), which is what makes education an investment in human capital rather than pure consumption, directly feeding the endogenous-growth channels covered in the previous chapter.
Gender and Amartya Sen's capability approach — Sen reframed development as the expansion of people's real FREEDOMS/CAPABILITIES to lead the lives they value, rather than income alone; gender gaps in labour-force participation, wages, education and decision-making power are read, on this view, as a direct shortfall of development itself, not merely a side-effect to be addressed after growth is achieved.

Key takeaways

PQLI (literacy, infant mortality, life expectancy at one) predates and simplifies HDI (life expectancy, education, GNI per capita), which since 2010 uses a geometric mean that penalises a poor performance in any single dimension.
The SDGs (17 goals, 2015-2030, universal) succeeded the MDGs (8 goals, 2000-2015, developing-country focused), integrating environmental sustainability alongside social/economic goals.
The headcount ratio ignores depth of poverty, which the poverty gap index captures; the MPI identifies poverty as simultaneous multidimensional deprivation, not income shortfall alone.
The Gini coefficient (0 = perfect equality, 1 = maximum inequality) formalises the gap between the Lorenz curve and the equality diagonal; the Kuznets inverted-U hypothesis of rising-then-falling inequality with development is contested, not universal.
Health and education are both development outcomes and productive inputs; Sen's capability approach reframes development as expanding real freedoms, making gender gaps a direct shortfall of development itself.

Practice questions (9)

Attempt each one before opening the answer. Every explanation names the tempting wrong option as well as the right one, because that is where marks are lost.

The Physical Quality of Life Index (PQLI) was deliberately designed to:
1. Avoid needing income data, using literacy, infant mortality and life expectancy instead
2. Replace HDI entirely after 2010
3. Measure only GNP per capita
4. Ignore health entirely
Show answer
Answer: A — Avoid needing income data, using literacy, infant mortality and life expectancy instead
Morris designed PQLI specifically as an alternative to income-based measures, capturing basic-needs achievement directly through three non-income indicators — it predates HDI rather than being replaced by it in any direct sense.
Since the 2010 methodology revision, the HDI combines its three dimension indices using:
1. A geometric mean, which penalises a very poor performance in any one dimension
2. A simple arithmetic mean with no penalty for imbalance
3. Only the income dimension, ignoring health and education
4. A random weighting scheme
Show answer
Answer: A — A geometric mean, which penalises a very poor performance in any one dimension
The switch to a geometric mean means an extremely low score on one dimension cannot be fully offset by a very high score on another, unlike an arithmetic average, which is precisely why the 2010 revision is considered methodologically stricter.
Compared to the Millennium Development Goals (MDGs), the Sustainable Development Goals (SDGs) are:
1. Broader (17 goals) and universal, applying to every country rather than developing countries alone
2. Narrower, with fewer goals than the MDGs
3. Focused solely on developed countries
4. Identical in scope to the MDGs
Show answer
Answer: A — Broader (17 goals) and universal, applying to every country rather than developing countries alone
The SDGs (17 goals, 2015-2030) deliberately widened the MDGs' 8-goal, developing-country-focused agenda into a universal framework integrating environmental sustainability with social and economic goals.
The headcount ratio of poverty, unlike the poverty gap index, fails to capture:
1. The depth of poverty — how far below the poverty line the poor actually are
2. The total population of a country
3. The exchange rate
4. The literacy rate
Show answer
Answer: A — The depth of poverty — how far below the poverty line the poor actually are
The headcount ratio only counts how MANY people are below the poverty line, treating someone just below the line the same as someone far below it; the poverty gap index specifically measures this average shortfall, capturing depth.
A Gini coefficient of 0 represents:
1. Perfect equality — the Lorenz curve coincides with the diagonal
2. Maximum inequality
3. A poverty line
4. An undefined value
Show answer
Answer: A — Perfect equality — the Lorenz curve coincides with the diagonal
A Gini of 0 means there is no gap between the Lorenz curve and the diagonal — every x% of the population holds exactly x% of income — the reference point of perfect equality, with 1 marking maximum inequality.
Kuznets's 'inverted-U' hypothesis proposes that, as an economy develops, inequality:
1. First rises during early industrialisation, then falls as development matures
2. Falls continuously from the very start of development
3. Never changes at all
4. Is unrelated to industrialisation
Show answer
Answer: A — First rises during early industrialisation, then falls as development matures
Kuznets proposed inequality rises as labour shifts into a higher-inequality modern sector and then falls as the modern sector absorbs most of the workforce — an empirical hypothesis that is contested and far from universal in later cross-country data.
Amartya Sen's capability approach reframes development as:
1. The expansion of people's real freedoms/capabilities to lead the lives they value, not income alone
2. Only the growth of per-capita GNP
3. A fixed poverty line applied uniformly worldwide
4. The Gini coefficient alone
Show answer
Answer: A — The expansion of people's real freedoms/capabilities to lead the lives they value, not income alone
Sen's capability approach is precisely the shift from income-centred measures to a broader focus on substantive freedoms and capabilities, which is the philosophical foundation the HDI itself draws on.
Which of the following are components of the Physical Quality of Life Index (PQLI)?
1. Literacy rate
2. Infant mortality rate
3. Life expectancy at age one
4. GNI per capita
Show answer
Answer: A — Literacy rate; B — Infant mortality rate; C — Life expectancy at age one
PQLI's three equally-weighted components are literacy, infant mortality and life expectancy at one; GNI per capita is a component of the later HDI, not PQLI, which was specifically designed to avoid income data.
Name the poverty measure (Alkire-Foster method) that identifies a person as poor based on simultaneous deprivation across multiple indicators of health, education and living standards, rather than income alone.
Numerical answer — type the value.
Show answer
Answer: Multidimensional Poverty Index
The Multidimensional Poverty Index (MPI) is the standard name, and it is designed precisely to capture deprivations a purely income-based poverty line can miss entirely.