The Importance of Variables in Composite Indices: A Contribution to the Methodology and Application to Development Indices

Martin Schlossarek (), Miroslav Syrovátka and Ondřej Vencálek
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Martin Schlossarek: Palacký University Olomouc
Miroslav Syrovátka: Palacký University Olomouc
Ondřej Vencálek: Palacký University Olomouc

Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, 2019, vol. 145, issue 3, No 19, 1125-1160

Abstract: Abstract The paper examines the issue of weights and importance in composite indices of development. Building a composite index involves several steps, one of them being the weighting of variables. The nominal weight assigned to a variable often differs from the degree to which the variable affects the scores of the overall index. The newly suggested notion of importance is based on the idea that an important indicator, if omitted from the index, causes large changes in countries’ results. We propose a method of measuring the importance and apply it to inequality variables in composite indices of development. The results show a low importance for most inequality variables, and for some of them, a large discrepancy between the nominal weights and the importance. We argue that the importance of variables should be considered in the process of index construction. This may imply a modification of the index when there is a large discrepancy between the nominal weights and importance and when the importance of some variables is extremely low. Whether any such modification is justified must be decided within the context of the particular index.

Keywords: Composite indicator; Composite index; Importance; Weighting; Development indicator; Inequality (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s11205-019-02125-9

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