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Creating Composite Indicators with DEA and Robustness Analysis: The Case of the Technology Achievement Index
L. Cherchye, W. Moesen, N. Rogge, T. Van Puyenbroeck, M. Saisana, A. Saltelli, R. Liska and S. Tarantola
The Journal of the Operational Research Society
Vol. 59, No. 2, Operational Research in Government (Feb., 2008), pp. 239-251
Stable URL: http://www.jstor.org/stable/30132778
Page Count: 13
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Composite indicators (CIs) are often used for benchmarking countries' performance, but they frequently stir controversies about the unavoidable subjectivity in their construction. Data Envelopment Analysis helps to overcome some key limitations, as it does not need any prior information on either the normalization of sub-indicators or on an agreed unique set of weights. Still, subjective decisions remain, and such modelling uncertainty propagates onto countries' CI scores and rankings. Uncertainty and sensitivity analysis are therefore needed to assess the robustness of the final outcome and to analyse how much each source of uncertainty contributes to the output variance. The current paper reports on these issues, using the Technology Achievement Index as an illustration.
The Journal of the Operational Research Society © 2008 Operational Research Society