Composite Indices, Alternative Weights, and Comparison Robustness

23 Pages Posted: 27 Oct 2016 Last revised: 12 Apr 2018

See all articles by Suman Seth

Suman Seth

University of Leeds - Economics Division; University of Oxford - Oxford Poverty & Human Development Initiative

Mark McGillivray

Deakin University

Date Written: April 10, 2018

Abstract

Composite indices are widely used in Development Economics and can often be highly influential. Yet most remain controversial owing to inter alia the arbitrary selection of component weights. Several studies have proposed testing the robustness of rankings generated by composite indices with respect to alternative weights but have not provided sufficient guidance on the choice of these alternatives. This paper proposes a holistic yet theoretically novel approach for selecting sets of alternatives weights and assessing comparison robustness that is applicable to linear composite indices with any finite number of dimensions. Our approach is founded on the main normative assumption that a consensus has been reached on the minimum and the maximum allowable weights that should be assigned to the components. This approach is applied to robustness testing of inter-temporal country improvements generated by arguably the world’s most influential composite development index, the UNDP Human Development Index (HDI).

Keywords: Composite Indices, Weights, Rank Robustness Tests, Inter-Temporal Comparisons, Human Development Index

JEL Classification: D63, C6, I31, O10

Suggested Citation

Seth, Suman and McGillivray, Mark, Composite Indices, Alternative Weights, and Comparison Robustness (April 10, 2018). Leeds University Business School Working Paper No. 18-06. Available at SSRN: https://ssrn.com/abstract=2859141 or http://dx.doi.org/10.2139/ssrn.2859141

Suman Seth (Contact Author)

University of Leeds - Economics Division ( email )

Leeds LS2 9JT
United Kingdom
+44(0)1133432629 (Phone)

HOME PAGE: http://business.leeds.ac.uk/about-us/our-people/staff-directory/profile/suman-seth/

University of Oxford - Oxford Poverty & Human Development Initiative

3 Mansfield Road
Queen Elizabeth House
Oxford, Oxfordshire OX1 3TB
United Kingdom
+44 1865 618643 (Phone)

HOME PAGE: http://ophi.org.uk/about/people/research-associates-and-advisors/suman-seth/

Mark McGillivray

Deakin University

75 Pigdons Road
Victoria, Victoria 3216
Australia

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