Comparison of Old and New Methodology in Human Development and Poverty Indexes: A Case of the Least Developed Countries

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The most common indicators for measuring the countrieseconomic level are the macroeconomic aggregates such as the per capita Gross National Product or Gross National Income. Though they reflect the creation of added value, their drawback is that they do not include aspects such as the social, political, cultural or environmental side. It is therefore necessary to create and use alternatives for measuring ongoing economic development. These alternatives can be indicators that reflect socio-economic development and the degree of economic deprivation, and include the Human Development Index and Human Poverty Index, or Multidimensional Index of Poverty. As the world economy changes, such as bio-social system, the structure of these two indices are also changing in order to better reflect the conditions and state of economies. This paper deals with the development of both human development and poverty indexes in general and, secondly, their empirical research focusing on the poorest part of the world - the Least Developed Countries. A two-sided comparison of traditional and new formulations of these indices found significant differences in achieved levels. The analysis shows that using the new methodology, human development index worsened values of individual economies, with the exception of three countries. The results of a new methodology of poverty indexes are not so clear, but more satisfactory, since nearly half of economies did not change the values and eight countries improved their situation in relation to poverty.