A Perceived Human Development Index

The objective of the paper is to build a Perceived Human Development Index (PHDI) framework by assembling the HDI components, namely indicators on income, health and education in their subjective version. We propose here to introduce a fourth dimension linked to perceptions on work conditions, given their role in the “happiness” literature and in social policy. We study how the perceptions about the individual’s satisfaction with income, education, work and health are related to their objective counterparts. We use a sample of Latin American and Caribbean (LAC) countries where we take advantage of a larger set of questions on the four groups of social variables included in the Gallup World Poll by the IADB. We emphasize the impacts of objective income and age on these perceptions. Complementarily, in the appendix we use the full sample of 132 countries where a smaller set of variables can be included, which provide a greater degree of freedom to study the impact of objective HDI components observed at the country level on the formation of an individual’s perception on income, education, work, health and life satisfaction. These exercises provide useful insights about the workings of the beneficiaries’ point of view to understand the transmission mechanism of key social policy ingredients into perceptions. In particular, the so-called PHDI may provide a complementary subjective reference to the HDI. We also study how one’s satisfaction with life is established, measuring the relative importance given to income vis-à-vis health and education. Estimating these “instantaneous happiness functions” will help to assess the relative weights attributed to income, health and education in the HDI, which is a benchmark in the multidimensional social indicators toolbox used in practice.