Creating composite indicators with data envelopment analysis (DEA) and robustness analysis: the case of the Technology Achievement Index

Creating composite indicators with data envelopment analysis (DEA) and robustness analysis: the case of the Technology Achievement Index

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Article ID: iaor2009717
Country: United Kingdom
Volume: 59
Issue: 2
Start Page Number: 239
End Page Number: 251
Publication Date: Feb 2008
Journal: Journal of the Operational Research Society
Authors: , , , , , , ,
Keywords: construction & architecture
Abstract:

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.

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