Creating Composite Indicators with DEA and Robustness Analysis: the case of the Technology Achievement Index

Laurens Cherchye, Wim Moesen (), Nicky Rogge (), Tom Van Puyenbroeck (), Michaela Saisana (), Andrea Saltelli, Roman Liska and S. Tarantola ()

Public Economics Working Paper Series from Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics

Abstract: Composite indicators are regularly used for benchmarking countries’ performance, but equally often stir controversies about the unavoidable subjectivity that is connected with their construction. Data Envelopment Analysis helps to overcome some key limitations, viz., the undesirable dependence of final results from the preliminary normalization of sub-indicators, and, more cogently, from the subjective nature of the weights used for aggregating. Still, subjective decisions remain, and such modelling uncertainty propagates onto countries’ composite indicator values and relative rankings. Uncertainty and sensitivity analysis are therefore needed to assess robustness of final results and to analyze how much each individual source of uncertainty contributes to the output variance. The current paper reports on these issues, using the Technology Achievement Index as an illustration.factor is more important in explaining the observed progress.

Keywords: composite indicators; aggregation; weighting; Internal Market (search for similar items in EconPapers)
JEL-codes: E13 E60 F02 O47 (search for similar items in EconPapers)
Pages: 21 pp.
Date: 2006
New Economics Papers: this item is included in nep-ino and nep-mac
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Citations: View citations in EconPapers (23)

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Journal Article: Creating composite indicators with DEA and robustness analysis: the case of the Technology Achievement Index (2008)
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