A comparative measure of welfare among small countries

Abstract

The Overseas Development Council has devised a measure which includes life expectancy, infant mortality and literacy as its basic elements. It is called the Physical Quality of Life Index (PQLI) and is designed to observe the social progress or decline of nations by means other than GNP. The PQLI consolidates the data into a composite index by rating each factor on a scale from 1 to 100 and then ranking the countries according to their performance within these limits. This paper illustrates the development of a composite index which includes the basic three factors suggested by the PQLI, but uses a taxonomic distance criterion adopted by Lin. The index may serve as a means of comparison among small nations. First, since the component variables are expressed in incomparable units of measure, the data are normalized with a conventional transformation. The ideal country is taken to be the country with the most favorable figure for each factor. For instance, if Norway has achieved the best result in life expectancy, then Norway is chosen as the ideal country for this particular factor.