Benefit-of-the-Doubt Composite Indicators and Use of Weight Restrictions

Ana S. Camanho (), Andreia Zanella () and Victor Moutinho ()
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Ana S. Camanho: Universidade do Porto
Andreia Zanella: Universidade Federal de Santa Catarina
Victor Moutinho: Universidade da Beira Interior

A chapter in Advanced Mathematical Methods for Economic Efficiency Analysis, 2023, pp 93-112 from Springer

Abstract: Abstract This chapter reviews the construction of Benefit-of-the-Doubt Composite Indicators (BoD CI) that allow the aggregation of individual indicators to obtain an overall measure of performance. This involves using frontier methods to reflect the relative performance of multidimensional concepts beyond the traditional production setting involving the transformation of inputs into outputs. The chapter reviews the alternative formulations of CI, including the Directional BoD CI based on a Directional Distance Function model, which allows the aggregation of desirable and undesirable indicators. CI models often require the specification of weight restrictions to reflect the relative importance of indicators. Alternative formulations for indicator-level and category-level restrictions are discussed. The advantages and limitations of using virtual weight restrictions, expressing the importance of indicators in percentage terms, are also explored. This chapter finishes with a small illustrative application of assessments involving Directional Composite Indicators with weight restrictions.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-031-29583-6_6

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DOI: 10.1007/978-3-031-29583-6_6

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