CHAPTER 02

LITERATURE REVIEW ON PROSPERITY INDICATORS

2.1 Introduction

A healthy, wealthy and happy people constitute a prosperous nation. The term prosperity has a wider meaning: enhancement of the quality of life of people through sustainable wealth creation and inclusion of all segments of the society in enjoying the benefits of development for which an inalienable pre requisite is the balanced regional development (Somapala, 2008). Accurately assessing the wellbeing of an entire society is no simple matter, as tempting to focus on purely financial measures, which have become easily available in recent years. But if we take the into account, we should consider a broader concept, which is known as prosperity

(Legatum Institute, 2011). Many countries have developed prosperity indicators specific to their social, political and economical context.

2.1.1 Principles of prosperity

According to the Legatum Institute (2011) there are general principles relevant to the promotion of national prosperity. These are:

• Freedom of choice is crucial

• For very poor countries, raising incomes is the first priority

• Money matters to people, but only up to a point

• Growth in invested capital is the strongest driver of long term economic growth 6 • Dependence on foreign development aid reduces long term growth rates

• Open economies in which foreign direct investment and international trade play larger

roles have higher long term growth rates

• Lower costs of bureaucracy increase economic growth rates

(Legatum Institute, 2011)

2.2 .

Economic development is defined as the development of economy of countries or regions for the well-being of their inhabitants. It is the process by which a nation improves the economic, political, and social well being of its people. From a policy perspective, economic development can be defined as efforts that seek to improve the economic well-being and quality of life for a community by creating and/or retaining jobs and supporting or growing incomes and the tax base

(Sheffrin, 2003).

Economic development also refers to improvements in a variety of indicators such as literacy rates, life expectancy, and rates. GDP is a specific measure of economic that does not take into account important aspects such as leisure time, environmental quality, freedom or social justice (Beyond Economic Growth Student Book, 2011).

There are several indicators available to measure economic development. Different composite measures have been developed that take into account the multidimensional character of development (Kruijk and Rutten, 2007). The indicators are Gross National Product (GNP),

7 Physical Quality of Life Index (PQLI), (HDI), Gender Development

Index (GDI) and the Human Poverty Index (HPI) of the UNDP. The above measures are able to account for the fact that poverty is not only associated with respect to insufficient income or consumption, but also with insufficient outcomes with respect to education, , insecurity, lack of social relations, lack of human rights activism and so on (Kruijk and Rutten, 2007).

The estimation of Human Development Index (HDI) at regional level has been done for different states of India by Shivakumar (1991). The estimation of Human Poverty Index (HPI) at regional level was done for different states of India by Krishnaji (1997).

2.3 (GDP)

Measures of national income and output are used in to estimate the welfare of an economy through totaling the value of goods and services produced in the economy. The primary measures of national income and output are Gross National Product (GNP), Gross Domestic

Product (GDP), (GNI), Net National Product (NNP) and the Net National

Income (NNI). Among these GDP is used to measure the wealth of the country (Federal Reserve

Statistical Release, 2011).

There are three main ways of calculating the GDP. They are the output approach, income approach and the expenditure approach. Among these methods the expenditure approach is the most popular national output accounting method. The basic formula for calculating the GDP

(Federal Reserve Statistical Release, 2011) is given by equation 2.1

GDP = C + / + G + (X- M). (2.1) 8 : {

Where,

C = Household consumption expenditure/ Personal consumption expenditure,

/ = Gross private domestic investment,

G = Government consumption and gross investment expenditure,

X = Gross exports of goods and services and

M = Gross imports of goods and services.

GDP places too much emphasis on consumption and ignores the wealth distribution. Importantly it also takes no account of environmental issues. GDP expresses the content of physical flows of

“capital, industrial production, services, resources and agricultural product”. But GDP might not be a good wealth rate measure because it does not take into account the following:

• the housework value

• the effect of wealth distribution and income on individual people’s wealth

• ignores affluence decline as a result of the environmental destruction

• doubtfully supposes “ defensive expenses” as a contribution to affluence

(Mederly, 2003)

Due to the shortcomings of the GDP as a indicator of economic development, “Human

Development Index” was proposed by the Development Programme(UNDP) in

its 1990 (UNDP, 1990).

■ Tirs \ »• 9 l a* *

5 2.4 Human Development Index (HDI)

In the Human Development Report, Human development is defined as “a process of enlarging people’s choices”. According to the Human Development Report, this is accomplished most fundamentally by living a long and healthy life, being educated, and having a decent standard of living; and it is both augmented and facilitated by political freedom, guaranteed human rights, and person self respect(Kelley, 1991). Human Development could also be defined as a development paradigm that is about much more than just the rise or fall of national incomes. It is about creating an environment in which people can develop their full potential and lead productive, creative lives in accord with their needs and interests. People are the real wealth of nations. Development is thus about expanding the choices people have to lead lives they value

(UNDP, 1998).

Human Development Index could be used for different purposes. Primarily it could be used to,

• Capture the attention of policy makers, media and NGOs and to draw their attention away

from the more usual economic statistics and focus instead on human outcomes. The HDI

was created to re-emphasize that people and their capabilities should be the ultimate

criteria for assessing the development of a country, not economic growth.

• The second purpose is to question national policy choices - asking how two countries

with the same level of income per person can end up with such different human

development outcomes (HDI levels).

• The third purpose is to highlight wide differences within countries, between provinces or

states, across gender, ethnicity, and other socioeconomic groupings. Highlighting internal

disparities along these lines has raised national debate in many countries (UNDP, 1997).

10 :TIuman Development Index” is a composite of life expectancy at birth, adult literacy, and real gross domestic product per capita (Kelley, 1991). The life expectancy at birth captures several aspects of welfare because of its close correlation with nutrition, health, and other important biological and social achievements (Shivakumar, 1991). The adult literacy measures on how many adults can read and write in a particular nation (UNDP, 1997).

The GDP measures the consumer buying power across the country. This is facilitated by using a

“purchasing power parity index” (Kelley, 1991). The logarithm of per capita income is taken to reflect the conversion of income into good living (Shivakumar, 1991).

In order to construct the Human Development Index (HDI), the first step is to specify a minimum value (the maximum deprivation set to one) and a maximum value (no deprivation equal to zero) for life expectancy^), literacy(X2);

(X3)(Shivakumar, 1991).Then the deprivation index is computed for each indicator of human development using equation 2.2.

(maxXij - Xij) DiJ = (2.2) (maxXij —min Xij)

Where,

DtJ - deprivation index of;th variable for £th country(/ = 1,2,3), max X^ - maximum value of j,th variable for £Ul country,

X^ - value of jlh variable for Ith country and

min X^ - minimum value of jih variable for Ith country.

11 Then a “Composite Deprivation Index” (CDI) of the three indicators is obtained by simple averaging (Kelley, 1991). Then the Human Development Index (HDI) is obtained by subtracting the composite deprivation from unity (Kelley, 1991).

For the ith country, CDIi = “E/=i Dij (2.3)

HDIi = 1 - CDIt (2.4)

However there are several arguments against Human Development Index (HDI), which says that it is not enough to measure a country’s level of development. Because the concept of human development is much broader than what can be captured in the HDI, or any other of the composite indices in this report. The HDI, for example, does not reflect political participation or gender inequalities. The HDI and the other composite indices can only offer a broad proxy on some of the key the issues of human development, gender disparity, and human poverty. A complete picture of a country's level of human development requires analysis of other human development indicators and information (UNDP, 1996).

2.5 Poverty

In the 1970’s poverty was defined in financial terms only. Accordingly weak purchasing power, or low per capita income was conventionally widely accepted as the main indicator for poverty.

As a result of experience and world-wide discussion, the World Bank included social aspects in their definition of poverty, defining it as the inability to achieve a minimum standard of living. In

spite of this, world-wide poverty lines were still defined as monetary poverty lines, leading to a

12 discrepancy between definition of poverty and related indicators for monitoring purposes

JR-einhard and Wijeratne, 2000).

As a possible solution for this dilemma, the concept of “basic needs” was suggested. Basic needs include food, health, primary education, favorable environmental conditions, and a social and cultural life, which all are required in sufficient quality and quantity (Gross, 1997). A broader definition of “human poverty” has been proposed wherein poverty is seen primarily as relating to peoples capabilities and opportunities (UNDP, 1997). Basic needs are achievable through adequate means, such as finance, time, skills and social or cultural position (Maxwell and Smith,

1992).

Nevertheless poverty has been defined and understood in several ways. There are four currently accepted approaches. They are monetary, capabilities, and participatory approaches.

• The monetary approach views income or consumption data as being a fair proxy for the

welfare of an individual or household (Cader and Melis,2004). Even if we accept that the

monetary approach can measure income poverty, we need to recognize that it does not

tell us much about the actual circumstances of the poor. By focusing on other indicators,

such as education, health, empowerment and access to infrastructure, services and

opportunities we can get a better picture of the living conditions of poor groups

(Gunewardena,2005).

• The capabilities approach to poverty measurement is exemplified by the UNDP’s Human

Development Index (HDI), which sees human development in terms of the freedom to

live a socially acceptable and individually valued life (Cader and Melis,2004).

13 • The social exclusion approach to poverty is developed for industrialized economies. It

focuses on marginal groups within a society. The weakness of this approach is that the

identification of a group or society as ‘poor’ may merely validate an initial foregone

conclusion, which can call into question all subsequent inferences.

• The participatory approach is largely qualitative, and includes a wide range of

instruments to assess poverty from the perspective of the poor themselves as well as other

non-poor members of the community (Cader and Melis, 2004).

It is also said that there is necessity to listen to the poor people’s preferences related to their needs, thus include participation in social, political and economic decisions and enable the target group to participate in all phases of development co-operation: planning, monitoring and evaluation (Chambers, 1991).So the poverty is defined as “individuals or groups are not able to satisfy their basic needs adequately”(Reinhard and Wijeratne,2000).

Another version of poverty is also defined as the shortage of common things such as food, clothing, shelter and safe drinking water, all of which determine our quality of life. It may also include the lack of access to opportunities such as education and employment which aid the escape from poverty and/or allow one to enjoy the respect of fellow citizens (Schwartz, 2005).

2.5.1 Use of poverty measurements

Poverty measures have multiple constituencies (e.g., government policy makers, NGOs, the

general public, and researchers), and these scattered stakeholders can have competing needs. One

important use of poverty measures is to serve as a monitor of social and economic conditions and

function as a benchmark of or failure. Poverty measures serve as the indicators by 14 which policy results are gauged and by which the role of events (the impact of runaway inflation, ior example) are weighed (United Nations Statistics Division, 2005).

A second use for poverty measures is descriptive, and its importance is sometimes under­ estimated. Poverty measures, though, often play critical roles in summarizing complex social and economic conditions in ways that inform conversations around economic and social priorities (United Nations Statistics Division, 2005).

Moreover, as with the social exclusion approach, the participatory approach to is not conducive for comparison among different communities, regions or countries

(Laderchi et al., 2003). An approach that provides for measuring poverty as a dynamic phenomenon can address the risk and vulnerability of different households. Poverty trends can be measured as a function of the shortfall of current income or consumption expenditures from a poverty line, and regular measurements with this approach would be able to differentiate between chronic or transitory poverty. However, the measurement of these factors and the development of a composite index are challenging in terms of capacities, both human and financial (Cader and Melis, 2004).

2.5.2 Poverty measures indices

Various poverty measures have been suggested by various researches. The most frequently used measures are the Head count index (HCI), Poverty gap ratio (PGR) and the Squared poverty gap ratio (SPGR).

15 Head count index (HCI)

The best known poverty measure is the headcount, the share of a whose resources fall below the poverty line. The measure is simple and clear, and, not surprisingly, it is the most commonly calculated poverty measure. The measure literally counts heads, allowing policymakers and researchers to track the most immediate dimension of the human scale of poverty (Kruijk and Rutten, 2007).

Poverty gap ratio (PGR)

A second widely-used measure is the Poverty gap ratio (PGR). The poverty gap measures the amount of money by which each individual falls below the poverty line. As a sum, the total shortfall can be calculated using equation 2.5.

PGR = flyyq —Vi (2.5) \nJ /—li-x z

In equation 2.5, poverty line is z, income is y, there are n poor households, and individuals are indexed by i. As a sum, the figure may be helpful for budget planners, but it obscures the sense

of individual deprivations (United Nations Statistics Division, 2005). Therefore it has a problem

similar to the headcount: it is descriptively very useful but, if used alone, would serve as a poor

guide to resource allocation.

Squared poverty gap ratio (SPGR)

A variant of poverty gap is the squared poverty gap ratio (SPGR). This was developed to

measure the severity of poverty (Kruijk and Rutten, 2007). The SPGR is able to take into account

inequality among the poor by placing a higher weight on those households further away from the

poverty line. SPGR is calculated using equation 2.6, which follows the notation of equation 2.5. 16 SPGR = ©•ZLf-a* (2.6) From the mid-1970s onwards, composite measures have been developed that take into account the multidimensional character of development and its antipole poverty. These include the

Physical Quality of Life Index (PQLI) and the Human Development Index (HDI), the Gender

Development Index (GDI) and the Human Poverty Indices (HPI) of the UNDP. Such measures are able to account for the fact that poverty is not only associated with respect to insufficient income or consumption, but also with insufficient outcomes with respect to education, health, insecurity, lack of social relations, lack of voice and so on (Kruijk and Rutten, 2007).

2.5.3 Human poverty index (HPI)

The Human Development Report (1997) presents a human poverty index and ranks 78 poor countries by this index. These index values and ranks, tell us how the intensity of poverty raises across the countries. The poverty measures based on the income criterion do not capture deprivation of many kinds. Human poverty is more than income poverty, which is the denial of choices and opportunities for living a tolerable life. While the concept of Human development focuses attention on levels of achievement and fulfillment, the concept of human poverty concentrates on deprivation and shortfalls (UNDP, 1997). But difficulty in measuring income poverty is a poor argument for focusing on other dimensions of welfare and deprivation (Deaton,

2000). Rather than measure poverty by income, the HPI uses indicators of the most basic dimensions of deprivation: a short life, lack of basic education and lack of access to public and private resources. The HPI concentrates on the deprivation in the three essential elements of human life already reflected in the HDI: longevity, knowledge and a decent standard of living

(UNDP, 1997).

17 Tuman Poverty index includes three types of deprivation. They are the deprivation in survival, in education and knowledge and in economic provisioning.

• The survival deprivation is measured by the percentage of people (in a given country)

that are not expected to survive to age 40 years (Pi).

• Deprivation in education and knowledge are measured by the adult literacy rate (P2).

• Deprivation in economic provisioning (P3), which is computed as the mean of three

variables: population without access to safe water (P31), population without, access to

health services (P32) and underweight children the age 5 years (P33) - all three expressed

in percentages.(Krishnaji, 1997)

The Human Poverty Index (HPI) is then obtained as the cube root of the average of the three components of deprivation (Krishnaji, 1997). Likewise the Human Poverty Index (HPI) for each district of Sri Lanka could be estimated. There are suggested obvious alternatives to the Human

Poverty Index (HPI), which are used to examine the sensitivity of ranks. They are

• PCD: First principal component of Pls P2and P3,based on the correlation matrix.

• MEAN3: Simple mean of the above 3 variables.

• ALT3: Power mean of order 3 of Pl5 P2 and P3,, where P3 is the power mean of order 3

of P31 > P32 and P33.

• MEAN5: Simple mean of all the 5 types of deprivation.

• PCI5: First principal component of the above 5 variables, based on the correlation matrix.

• ALT5 : Power mean of order 3 of all the 5 variables

18 f :A?jka "ORATUY/a rhe power mean is such that higher orders give more emphasis to the bigger values among the components of the vector of deprivations, unlike the simple mean, which of course assigns equal weights to all the components (Krishnaji, 1997). Likewise HPI and the other alternative jndicators can be estimated for all districts in Sri Lanka. Human Poverty Index (HPI) can be used as a tool of advocacy, a planning tool for identifying areas of concentrated poverty within a country and as a research tool. Human Poverty Index (HPI) also summarizes the extent of poverty along several dimensions, the distance to go, the progress made (Krishnaji, 1997).

The Human Poverty Index (HPI) has several uses. The primary use is to focus attention on the most deprived people and deprivations in basic human capabilities in a country, not on average national achievement. The human poverty indices focus directly on the number of people living in deprivation - presenting a very different picture from average national achievement. It also moves the focus of poverty debates away from concern about income poverty alone (UNDP,

1997).

The second use is to highlight the presence of human poverty in both the rich and poor countries.

High income per person is no guarantee of a poverty-free country. Even among the richest

countries, there is human poverty. The HPI-2 for selected high-income OECD countries (HPI-2)

shows that out of 19 countries, the US has the second highest level of income per person, and the

third highest rate of human poverty (UNDP, 1997). The third use is to guide national planning

for poverty alleviation. Many National Human Development Reports now break down the HPI

by region or other socioeconomic groups to identify the areas or social groups within the country

most deprived in terms of human poverty. The results can be dramatic, creating national debate

and helping to reshape policies (UNDP, 1997).

19

107079 2.6

The definition of food and nutrition security has evolved considerably over time. The starting point of ‘food security’ was food availability to bala nee unequal food distribution regionally and nationally. However, it was rapidly accepted that availability, though a necessary element, is not sufficient for food security, because food may be physically existent but inaccessible for those most in need. Therefore commonly food security is considering the dimensions access and availability of food on global, national, regional or household level (Reinhard and Wijeratne,

2000).

The World Bank defined food security as access by all people at all times to the food needed for

an active and healthy life (World Bank, 1986). The State of Food Insecurity 2001 explains it as a

situation that exists when all people, at all times, have physical, social and economic access to

sufficient, safe and nutritious food that meets their dietary needs and food preferences for an

active and healthy life (FAO, 2002).

At the World Food Summit in 1996, it was agreed that Food security, at the individual,

household, national, regional and global levels [is achieved] when all people, at all times, have

physical and economic access to sufficient, safe and nutritious food to meet their dietary needs

and food preferences for an active and healthy life (FAO, 1996).

In terms of food security of the nation, problems exist in some parts of the country. Therefore

ensuring food security is a very significant aspect of government economic policy in order to

make a healthy human resource available for the whole country. Poverty has been identified as a

vailable, food insecurity exists when people major factor for food insecurity. Even when food is a

have no economical strength to purchase food (De Silva, )

20 Therefore food security plays a significant role in determining the prosperous life of the citizens.

So the inclusion of food security related variables into Sri Lanka Prosperity Index becomes a essential criteria to measure the actual prosperity of the country.

So it is important to identify factors responsible for food insecurity and vulnerability in order to assist policy and decision makers with better targeting, effective resource mobilization, improved policy formulation and timely interventions. It is clear that a number of spatially distributed factors could contribute to the status of food security of the country. These variables can be viewed in terms of generalized spatial and temporal averages to determine the general status of food security in the long run, while dynamic changes of these variables could be considered in short term food security issues (De Silva. 2006). The variables included are shown in Table 2.1.

Table 2.1: Food security indicators and the corresponding variables.

Indicator Variables

Food Availability based on food production Population

Number of Agricultural holdings

Annual crop production

Livestock population and production

Annual rainfall and rainfall distribution

Food accessibility and Affordability Road length

Type A road

Type B road

Railway length

Household income

Household expenditure

Source: De Silva (2006)

21

! 1.7 Existing Prosperity Indices rhere are several prosperity indices available for different countries to measure the prosperity level. The prosperity indices differ from country to country, according to how a particular country could reflects its prosperity in its context.

2.7.1 The Legatum prosperity index (LPI)

The Legatum Prosperity Index was proposed by Legatum Institute as a result of an investigation into the various factors that drive prosperity in different countries. Legatum Prosperity Index compares not only the material wealth but also the life satisfaction of people in countries worldwide. The Index has defined national prosperity as the well rounded combination of both of these factors (Legatum Institute, 2010).

The Index is based on the statistical testing of 40 years of data on economic growth and life

satisfaction survey results for more than 50 countries worldwide. The Legatum Prosperity Index

combines more than 70 variables into 20 key indicators in order to rank countries, based on the

degree to which the actions of their people and governments drive or restrain the creation of

well-rounded prosperity. In the first annual edition of the index the coverage was limited to 50

countries, for which high quality data on the drivers of both material wealth and life satisfaction

is available.

The Legatum Prosperity Index is the result of an investigation into the various factorsthat drive

prosperity in different countries. Recent research advances have made itpossible to compare not

22

1 only the material wealth but also the life satisfaction of people in countries worldwide.

Accordingly, they have defined national prosperity as the well rounded combination of both of these factors (Legatum Institute, 2010). The key drivers of increasing material wealth, through sustained long-term economic growth, are:

(1) Growth in Invested Capital

(2) Low Dependence on Foreign Aid

(3) High Levels of Education

(4) Good Governance

(5) Low Dependence on Commodity Exports

(6) Low Costs of Bureaucracy

(7) Economic Openness

The key drivers of high levels of life satisfaction are:

(1) Freedom of Choice

(2) Good Health

(3) Equality of Opportunity

(4) Strong Religious Faith

(5) High Levels of Income

(6) Favorable Climate

(7) Political Rights and Civil Liberties

(8) Low Unemployment Rates

(9) Low Divorce Rates

23

■ 1 2.7.2 National prosperity index (NPI) of India

National Prosperity Index (NPI) was proposed by Dr.Abdul Kalam to measure the prosperity level of India. It has been defined as,

NPI = a + ft + c (2.7) Where, a = Annual growth rate of GDP,

i, = Improvement in quality of life of the people, particularly those living below the poverty line and c - The adoption of a value system derived from our civilization heritage in every walk of life which is unique to India.

The variable is a function of availability of housing, good water, nutrition, proper sanitation, quality education, quality healthcare and employment potential and ‘c’ is a function of promoting the joint family system, creation of a spirit of working together, leading a righteous way of life, removing social inequities, and above all promoting a conflict free, harmonious society. This will be indicated by peace in families and communities, reduction in corruption index, reduction in court cases, elimination of violence against children and women and communal tensions (National Prosperity Index, 2007).

2.7.3 Sacromento prosperity index (SPI)

Sacramento Regional Research Institute (SRRI) developed the pmsperity Me* to provide

Sacramento region a valuable tool to measure regional business and community leaders in the

24 economic prosperity and track its performance against competitors in order to evaluate the competition, identify opportunities for improvement, and ultimate impact change in the region.

In this regional economic prosperity includes three main components namely business, people and place. These variables span characteristics of the local business climate, workforce, and quality of life. The business component relates to aspects that describe a region’s economy and business climate. Elements that describe the people or workforce in a region are encompassed in

the people component. Finally, features that describe a region’s quality of life and environment

are captured in the place component. A balance of strong performance across all three

components contributes to regional prosperity (SRRI, 2010).

A selected number of indicators were chosen to create a quantitative measure for Business,

People and Place components as well as overall regional prosperity. The indicators for business

component are job growth, office vacancy rate, payroll growth, establishment growth,

unemployment rate and venture capital investment. The indicators for people component are

college enrollment, , high school progress, educational attainment, median

household income and household income spread. The indicators for place component are air

quality, commute time, crime rate, charitable contributions, fair market rent growth and housing

affordability (SRRI, 2010). All indicators used in the project reflect a balance of historical,

current and future performance and relate to aspects that regional organizations can influence or

directly affect.

Every indicator receives a score between 0 and 10 based on relative rankings where the best

performing region scores a 10, the lowest receives 0. The business, people and place components

are each created as a simple average of 6 indicators while the prosperity index is a simple

25 average of all 18 indicators. The average res are scaled as a percentage of the best performing region (SRRI, 2006).

2.7.4 Other prosperity indices

addition to the above three indices, the following indices ^ also n>melyi

i. YouGov Prosperity Index (YPI) of

ii. Sydney Prosperity Index (SPI) - Herald’s National Affairs Editor and Commsec and

iii. Regeneris Sustainable Prosperity Index - UK, Regeneris Consulting Ltd.

However details of these indices are not discussed here.

2.7.5 Sri Lanka prosperity index

The main focus of the Sri Lanka Prosperity Index (SLPI) is to measure the inter-provincial

prosperity level. The SLPI consist of twenty variables, which reflect the prosperity level of the

lives of our people. The twenty variables allows to branch the Sri Lanka Prosperity Index into

three sub indices namely the Economy and the Business Climate, Well being of the People and

the Infrastructure which carry different weights according to the number of variables falling into

a specific sub index as shown in Table 2.2. The weights of the three indicators are 0.30, 0.45 and

0-25 respectively.

26 Table 2.2: Composition of the Sri Lanka Prosperity Index

Economy of Business Well Being of the People Infrastructure (25%) Climate (30%) (45%)

Per capita GDP Hospital Beds (Govt) Per capita Electricity Consumption

Employment Rate Doctors(Govt) Telephone Density

Informal sector Infant survival rate Banking Density

People above poverty Maternal survival rate Road Density

Per capita BTT School density Law and order

Industrial density Pupil teacher Ratio

Continuation of Secondary education

O/L and A/L pass rate

Ownership of Vehicles

Source: Prosperity Index for Sri Lanka (2008)

In this computation, pre set lower and upper values for a variable will be determined in such a way that at all times in the foreseeable future, the value of the variable under consideration will fall between such predetermined lower and upper values (Somapala, 2008).

27 2.8 Summary

The literature review reveals that not much work has been done to develop suitable indicators for the measurement of human development, human poverty and prosperity indices in district levels of Sri Lanka. It is also noted that there currently there is no indicator to measure district level prosperity in Sri Lanka. The present Sri Lanka Prosperity Index (SLPI) fails to capture the

provincial prosperity in Sri Lanka due to its conceptual and statistical weaknesses. Further, no

work was reported for the development of district level prosperity indices in Sri Lanka.

28