Performance evaluation using multi-stage production frameworks: Assessing the tradeoffs among the economic, environmental, and social well-being

Abstract

Aiming to achieve sustainable development, a constantly growing number of countries have strived to promote economic growth while simultaneously mitigating environmental degradation and maximizing social welfare. However, despite the importance attributed to social well-being in contemporary discourse, its role has not received much attention in the performance evaluation literature. We propose a novel, multi-stage framework based on three dimensions of performance allowing us to assess the tradeoffs between the economic, environmental, and social efficiency in 28 OECD member countries from 2000 to 2019. We construct several scenarios representing policymakers' preferences by altering the weights assigned to the different performance pillars, allowing us to assess the environmental and social repercussions of economic growth. Our findings suggest that policies promoting relatively balanced growth patterns can offer opportunities for higher performance across all three pillars. At the same time, prioritizing development along any single dimension can trigger a relatively significant drop in progress in terms of the other two pillars. We also demonstrate that the sustainable development potential has varied across time and space. Comparisons suggest that the European OECD member countries have outperformed their non-European counterparts in terms of the economic performance, health outcomes, life expectancy, and carbon dioxide (CO2) emissions. Our results can provide policymakers with insights into strategies for promoting economic growth that account for sustainable development objectives.