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Multi-Dimensional Wellbeing Assessment: A General Method for Index Construction with an Application to Multivariate Deprivation

Author

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  • Gordon Anderson
  • Teng Wah Leo
  • Paul Anand

Abstract

This paper explores some difficulties encountered in multidimensional measures of wellbeing. In particular, it highlights the need for such indices to (i) incorporate information on individual preferences, (ii) be robust with respect to estimation assumptions given the 'curse of dimensionality' problem, and (iii) reflect complementarities and substitutabilities between dimensions. The paper proposes a procedure that enhances the Alkire and Foster (2011) Multidimensional Deprivation Index (AFMDI), drawing on recent work in Anderson et al. (2011), which addresses these difficulties. The approach provides the requisite flexibility in the representation of wellbeing component deprivations, whilst admitting the possibility of sub-component substitutability/complementarity in the index, and retains the ability to measure the impact of improvements/worsenings of sub-components within each category. It then provides an application to the measurement and valuation of opportunity in different domains using a unique data set for working age adults in the U.S.. Empirical findings suggest that freedoms are substitutable, that their values depend on an individual's needs, and that complementarities if they exist are weak. The paper then concludes that such indices are feasible to implement, and holds promise in economic applications ranging from measurement of progress in wellbeing, to the multidimensional assessment of poverty.

Suggested Citation

  • Gordon Anderson & Teng Wah Leo & Paul Anand, 2014. "Multi-Dimensional Wellbeing Assessment: A General Method for Index Construction with an Application to Multivariate Deprivation," Working Papers tecipa-524, University of Toronto, Department of Economics.
  • Handle: RePEc:tor:tecipa:tecipa-524
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    Cited by:

    1. Anand, Paul & Roope, Laurence & Peichl, Andreas, 2016. "Wellbeing Evidence for the Assessment of Progress," IZA Discussion Papers 9840, Institute for the Study of Labor (IZA).
    2. Gordon Anderson & Maria Grazia Pittau & Roberto Zelli, 2016. "Assessing the convergence and mobility of nations without artificially specified class boundaries," Journal of Economic Growth, Springer, vol. 21(3), pages 283-304, September.

    More about this item

    Keywords

    Multidimensional Wellbeing Measurement;

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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