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Noncompensatory/nonlinear composite indicators for ranking countries: a defensible setting

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  • Giuseppe Munda
  • Michela Nardo

Abstract

Composite indicators (or indexes) are very common in economic and business statistics for benchmarking the mutual and relative progress of countries in a variety of policy domains such as industrial competitiveness, sustainable development, globalization and innovation. The proliferation of the production of composite indicators by all the major international organizations is a clear symptom of their political importance and operational relevance in policy-making. As a consequence, improvements in the way these indicators are constructed and used seem to be a very important research issue from both the theoretical and operational points of view. This article aims at contributing to the improvement of the overall quality of composite indicators (or indexes) by looking at one of their technical weaknesses, that is, the aggregation convention used for their construction. For this aim, we build upon concepts coming from multi-criteria decision analysis, measurement theory and social choice. We start from the analysis of the axiomatic system underlying the mathematical modelling commonly used to construct composite indicators. Then a different methodological framework, based on noncompensatory/nonlinear aggregation rules, is developed. Main features of the proposed approach are: (i) the axiomatic system is made completely explicit and (ii) the sources of technical uncertainty and imprecise assessment are reduced to the minimum possible degree.

Suggested Citation

  • Giuseppe Munda & Michela Nardo, 2009. "Noncompensatory/nonlinear composite indicators for ranking countries: a defensible setting," Applied Economics, Taylor & Francis Journals, vol. 41(12), pages 1513-1523.
  • Handle: RePEc:taf:applec:v:41:y:2009:i:12:p:1513-1523 DOI: 10.1080/00036840601019364
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    Cited by:

    1. M. Azhar Hussain, 2016. "EU Country Rankings’ Sensitivity to the Choice of Welfare Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 125(1), pages 1-17, January.
    2. repec:eee:jeeman:v:85:y:2017:i:c:p:21-34 is not listed on IDEAS
    3. Enrico Casadio Tarabusi & Giulio Guarini, 2013. "An Unbalance Adjustment Method for Development Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 112(1), pages 19-45, May.
    4. Biresh K Sahoo & Ramadhar Singh & Bineet Mishra & Krithiga Sankaran, 2015. "Research Productivity in Management Schools of India: A Directional Benefit-of-Doubt Model Analysis," Working Papers id:7139, eSocialSciences.
    5. Matteo Mazziotta & Adriano Pareto, 2016. "On a Generalized Non-compensatory Composite Index for Measuring Socio-economic Phenomena," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(3), pages 983-1003, July.
    6. Radosevic, Slavo & Yoruk, Esin, 2013. "Entrepreneurial propensity of innovation systems: Theory, methodology and evidence," Research Policy, Elsevier, vol. 42(5), pages 1015-1038.
    7. Fusco, Elisa, 2015. "Enhancing non-compensatory composite indicators: A directional proposal," European Journal of Operational Research, Elsevier, vol. 242(2), pages 620-630.
    8. Giuseppe Munda, 2014. "On the Use of Shadow Prices for Sustainable Well-Being Measurement," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(2), pages 911-918, September.
    9. Mónica Domínguez-Serrano & Francisco Blancas, 2011. "A Gender Wellbeing Composite Indicator: The Best-Worst Global Evaluation Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 102(3), pages 477-496, July.
    10. repec:eee:ejores:v:264:y:2018:i:2:p:491-507 is not listed on IDEAS
    11. Stergios Athanassoglou, 2013. "Robust Multidimensional Welfare Comparisons: One Vector of Weights, One Vote," Working Papers 2013.40, Fondazione Eni Enrico Mattei.
    12. Emanuele Felice, 2012. "Neither dashboard nor 'mashup' indices: an empirical wealth approach as a pathway to a comprehensive measure of development," UHE Working papers 2012_01, Universitat Autònoma de Barcelona, Departament d'Economia i Història Econòmica, Unitat d'Història Econòmica.
    13. Giuseppe Munda, 2012. "Intensity of preference and related uncertainty in non-compensatory aggregation rules," Theory and Decision, Springer, vol. 73(4), pages 649-669, October.
    14. Fabio Boncinelli & Leonardo Casini, 2014. "A Comparison of the Well-Being of Agricultural and Non Agricultural Households Using a Multicriterial Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 119(1), pages 183-195, October.
    15. Vijaya Krishnan, 2015. "Development of a Multidimensional Living Conditions Index (LCI)," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 120(2), pages 455-481, January.
    16. P. Zhou & B. Ang & D. Zhou, 2010. "Weighting and Aggregation in Composite Indicator Construction: a Multiplicative Optimization Approach," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 96(1), pages 169-181, March.
    17. Rosalia Castellano & Antonella Rocca, 2015. "Assessing the gender gap in labour market index: volatility of results and reliability," International Journal of Social Economics, Emerald Group Publishing, vol. 42(8), pages 749-772, August.
    18. Marco Marozzi, 2015. "Measuring Trust in European Public Institutions," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 123(3), pages 879-895, September.
    19. Giuseppe Munda, 2012. "Choosing Aggregation Rules for Composite Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 109(3), pages 337-354, December.
    20. Emanuele Felice, 2016. "The Misty Grail: The Search for a Comprehensive Measure of Development and the Reasons for GDP Primacy," Development and Change, International Institute of Social Studies, vol. 47(5), pages 967-994, September.
    21. repec:eee:ejores:v:264:y:2018:i:1:p:1-16 is not listed on IDEAS
    22. Matteo Mazziotta, Adriano Pareto, 2013. "Methods For Constructing Composite Indices: One For All Or All For One?," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - Italian Review of Economics, Demography and Statistics, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 67(2), pages 67-80, April-Jun.
    23. Blancas, Francisco J. & Caballero, Rafael & González, Mercedes & Lozano-Oyola, Macarena & Pérez, Fátima, 2010. "Goal programming synthetic indicators: An application for sustainable tourism in Andalusian coastal counties," Ecological Economics, Elsevier, vol. 69(11), pages 2158-2172, September.
    24. Sahoo, Biresh K. & Singh, Ramadhar & Mishra, Bineet & Sankaran, Krithiga, 2017. "Research productivity in management schools of India during 1968-2015: A directional benefit-of-doubt model analysis," Omega, Elsevier, vol. 66(PA), pages 118-139.
    25. Slavo Radosevic & Esin Yoruk, 2016. "A New Metrics Of Technology Upgrading: The Central And East European Countries In A Comparative Perspective," UCL SSEES Economics and Business working paper series 2016-2, UCL School of Slavonic and East European Studies (SSEES).

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