Composite indicators of development: the importance of the weights

Moreira, Sandrina Berthault; Simões, Nádia; Crespo, Nuno

http://hdl.handle.net/10400.26/4496

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Authors

Moreira, Sandrina Berthault

Simões, Nádia

Crespo, Nuno

Abstract(s)

Measuring countries' levels of development is one of the most complex tasks in economics. The recognized multidimensionality of the phenomenon has increasingly led to the use of composite indicators in order to overcome the limitations usually identified in such measures as the income per capita (Bandura, 2008 [1]; Saisana, 2008 [2]). Using indicators such as this to assess development raises two crucial issues. On the one hand, one needs to identify the dimensions of development for each indicator as well as the content of each dimension. On the other hand, one also needs to assign weights to each dimension in order to have an aggregated indicator. This second issue has drawn little attention in the literature, and usually equal weights are attributed to all the dimensions of a given indicator. In the absence of any systematic analysis of their correspondence to the public perception regarding the importance of each dimension of development, these weights are arbitrarily fixed. This is so despite the fact that individuals are the ultimate beneficiaries of countries' development. The present paper seeks to close this gap in the literature, discussing in an explicit manner, the importance of the weights of each dimension of development.