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

21 Pages Posted: 8 Mar 2006

See all articles by L. Cherchye

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Wim Moesen

KU Leuven - Faculty of Business and Economics (FEB)

N. Rogge

KU Leuven - Faculty of Business and Economics (FEB)

Tom Van Puyenbroeck

European Academy of Brussels

Michaela Saisana

Joint Research Centre, Italy

Andrea Saltelli

Joint Research Centre , Italy

Roman Liska

Joint Research Centre , Italy

Stefano Tarantola

Joint Research Centre, Italy

Date Written: January 2006

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.

Keywords: Composite Indicators, Sensitivity Analysis, Data Envelopment Analysis

JEL Classification: E13, E60, F02, O47

Suggested Citation

Cherchye, Laurens and Moesen, Wim and Rogge, Nicky and Van Puyenbroeck, Tom and Saisana, Michaela and Saltelli, Andrea and Liska, Roman and Tarantola, Stefano, Creating Composite Indicators with DEA and Robustness Analysis: The Case of the Technology Achievement Index (January 2006). Available at SSRN: https://ssrn.com/abstract=888461 or http://dx.doi.org/10.2139/ssrn.888461

Laurens Cherchye (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Wim Moesen

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Nicky Rogge

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Tom Van Puyenbroeck

European Academy of Brussels ( email )

1000 Brussels
Belgium

Michaela Saisana

Joint Research Centre, Italy ( email )

Via E. Fermi 1
I-21020 Ispra (VA)
Italy

Andrea Saltelli

Joint Research Centre , Italy ( email )

Via E. Fermi 1
I-21020 Ispra (VA)
Italy

Roman Liska

Joint Research Centre , Italy ( email )

Via E. Fermi 1
I-21020 Ispra (VA)
Italy

Stefano Tarantola

Joint Research Centre, Italy ( email )

Via E. Fermi 1
I-21020 Ispra (VA)
Italy

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