An Introduction to ‘Benefit of the Doubt’ Composite Indicators

Abstract

Despite their increasing use, composite indicators remain controversial. The undesirable dependence of countries’ rankings on the preliminary normalization stage, and the disagreement among experts/stakeholders on the specific weighting scheme used to aggregate sub-indicators, are often invoked to undermine the credibility of composite indicators. Data envelopment analysis may be instrumental in overcoming these limitations. One part of its appeal in the composite indicator context stems from its invariance to measurement units, which entails that a normalization stage can be skipped. Secondly, it fills the informational gap in the ‘right’ set of weights by generating flexible ‘benefit of the doubt’-weights for each evaluated country. The ease of interpretation is a third advantage of the specific model that is the main focus of this paper. In sum, the method may help to neutralize some recurring sources of criticism on composite indicators, allowing one to shift the focus to other, and perhaps more essential stages of their construction.