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

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Author Info

  • Laurens Cherchye

    ()

  • Wim Moesen

    ()

  • Nicky Rogge

    ()

  • Tom Van Puyenbroeck

    ()

  • Michaela Saisana

    ()

  • A. Saltelli

    ()

  • R. Liska

    ()

  • S. Tarantola

    ()

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.

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File URL: http://www.econ.kuleuven.ac.be/ew/academic/econover/Papers/DPS0603.pdf
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Bibliographic Info

Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics in its series Public Economics Working Paper Series with number ces0613.

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Length: 21 pp.
Date of creation: 2006
Date of revision:
Handle: RePEc:wpe:papers:ces0613

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Keywords: composite indicators; aggregation; weighting; Internal Market;

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References

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  1. Cazals, Catherine & Florens, Jean-Pierre & Simar, Leopold, 2002. "Nonparametric frontier estimation: a robust approach," Journal of Econometrics, Elsevier, vol. 106(1), pages 1-25, January.
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Cited by:
  1. Billaut, Jean-Charles & Bouyssou, Denis & Vincke, Philippe, 2010. "Should you believe in the Shanghai ranking? An NCDM view," Economics Papers from University Paris Dauphine 123456789/2947, Paris Dauphine University.
  2. Bryony Hoskins & Massimiliano Mascherini, 2009. "Measuring Active Citizenship through the Development of a Composite Indicator," Social Indicators Research, Springer, vol. 90(3), pages 459-488, February.
  3. Andrew Sharpe & Brendon Andrews, 2013. "An Assessment of Weighting Methodologies for Composite Indicators: The case of the Index of Economic Well-being," CSLS Research Reports 2012-10, Centre for the Study of Living Standards.
  4. Biresh K. Sahoo & Debashis Acharya, 2012. "Constructing macroeconomic performance index of Indian states using DEA," Journal of Economic Studies, Emerald Group Publishing, vol. 39(1), pages 63-83, January.

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