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Setting Weights in Multidimensional Indices of Well-Being

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  • Koen Decancq and Maria Ana Lugo

Abstract

Multidimensional indices of well-being and deprivation have become increasingly popular, both in the theoretical and in the policy-oriented literature. By now, there is a wide range of methods to construct multidimensional well-being indices, differing in the way they transform, aggregate and weight the relevant dimensions. We use a unifying framework that allows us to compare the different approaches and to analyze the specific role of the dimension weights in each of them. In interplay with the choices on the transformation and aggregation, the weights play a crucial role in determining the trade-offs between the dimensions. Setting weights is hence inherently a delicate matter, reflecting important value judgements about the exact notion of well-being. From this perspective, we critically survey six methods that are proposed in the literature to set the weights.

Suggested Citation

  • Koen Decancq and Maria Ana Lugo, 2008. "Setting Weights in Multidimensional Indices of Well-Being," OPHI Working Papers ophiwp018, Queen Elizabeth House, University of Oxford.
  • Handle: RePEc:qeh:ophiwp:ophiwp018
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