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A note on Sigma–Mu efficiency analysis as a methodology for evaluating units through composite indicators

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  • Tsionas, Mike G.

Abstract

Recent research introduces a methodology for constructing composite indicators, called σ−μ efficiency analysis, illustrating its potential in a case study of world happiness. Building on the landmark research paper, we propose a novel model that allows statistical inference for both weights in the composite indicator as well as inefficiency, fully accounting for outliers in the data and unit-specific heterogeneity in weights. The new techniques are based on Bayesian analysis via Markov Chain Monte Carlo.

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  • Tsionas, Mike G., 2020. "A note on Sigma–Mu efficiency analysis as a methodology for evaluating units through composite indicators," European Journal of Operational Research, Elsevier, vol. 286(3), pages 1187-1196.
    • Handle: RePEc:eee:ejores:v:286:y:2020:i:3:p:1187-1196
    DOI: 10.1016/j.ejor.2020.03.076
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    References listed on IDEAS

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