Composite indices of physical quality of life, basic needs fulfilment, and income: A ‘principal component’ representation

Abstract In the context of international comparisons, the multivariate method of ’principal components’ is suggested for computing composite indices of economic development that capture per capita income, basic needs fulfilment, and other possible indicators of well-being. The method is conceptually appealing, easy to apply, and seems promising in several directions. Two illustrative applications are given. One develops a composite index based on the three PQLI constituents and per capita GNP for 147 countries. In the other, a composite index of basic needs fulfilment is first computed for 82 countries, and then a more inclusive measure, that also takes account of per capita GNP, is derived.