IDEAS home Printed from https://ideas.repec.org/a/spr/soinre/v118y2014i3p987-1007.html
   My bibliography  Save this article

Measuring World Better Life Frontier: A Composite Indicator for OECD Better Life Index

Author

Listed:
  • Hideyuki Mizobuchi

Abstract

The OECD Better Life initiative recently released a comprehensive set of 11 indicators of well-being covering a group of countries. Each individual indicator corresponds to a key topic that is essential to well-being. However, the problem of aggregating them is left to users of this dataset. Using these as individual indicators, we propose a composite indicator of overall well-being, which is intended to measure the performance of each country in terms of providing well-being to its people. The ‘benefit of the doubt’ approach (BOD), a well-known aggregation tool based on a weighed sum, assigns the most favourable weights for each entity under investigation. BOD may also be considered to evaluate the performance of each entity in terms of its efficiency. Regarding individual indicators as outputs, it constructs the benchmark production frontier from observed individual indicators. A composite indicator based on BOD equals the distance between each entity’s individual indicator and the production frontier, indicating its efficiency. It is widely considered that the well-being of a country’s people stems from its productive base, which is characterized by capital assets and social infrastructures. Thus, the productive base can be considered the input used to produce well-being, which is reflected by individual indicators. Therefore, when we apply BOD to aggregate individual well-being indicators across countries, we implicitly assume that all countries have the same productive base, as BOD addresses only the output and neglects the input. This inaccurate assumption leads to a distorted performance measure. Data envelopment analysis (DEA), in which BOD has its roots, is a tool to measure the efficiency of each entity by allowing for differences in inputs as well as outputs across entities. DEA also measures efficiency by using the distance to the production frontier; however, unlike BOD, DEA constructs the production frontier more accurately by utilizing the information of inputs as well as outputs, leading to a better performance measure. We apply DEA to aggregate 11 individual well-being indicators into a composite indicator using the World Bank’s estimates of each country’s productive base. The composite indicator based on BOD is distributed similarly to and is highly correlated with the existing Human Development Indicator (HDI). It is also positively correlated with GDP per capita. On the other hand, we show that the composite indicator based on DEA is negatively correlated with HDI as well as GDP per capita. Copyright Springer Science+Business Media Dordrecht 2014

Suggested Citation

  • Hideyuki Mizobuchi, 2014. "Measuring World Better Life Frontier: A Composite Indicator for OECD Better Life Index," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 118(3), pages 987-1007, September.
    • Handle: RePEc:spr:soinre:v:118:y:2014:i:3:p:987-1007
    DOI: 10.1007/s11205-013-0457-x
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11205-013-0457-x
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11205-013-0457-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kenneth Arrow & Partha Dasgupta & Lawrence Goulder & Gretchen Daily & Paul Ehrlich & Geoffrey Heal & Simon Levin & Karl-Göran Mäler & Stephen Schneider & David Starrett & Brian Walker, 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 147-172, Summer.
    2. Knox Lovell, C. A. & Pastor, Jesus T. & Turner, Judi A., 1995. "Measuring macroeconomic performance in the OECD: A comparison of European and non-European countries," European Journal of Operational Research, Elsevier, vol. 87(3), pages 507-518, December.
    3. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    4. Erik Schokkaert, 2007. "Capabilities and Satisfaction with Life," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 8(3), pages 415-430.
    5. Osman Zaim & Rolf Färe & Shawna Grosskopf, 2001. "An Economic Approach to Achievement and Improvement Indexes," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 56(1), pages 91-118, October.
    6. World Bank, 2011. "The Changing Wealth of Nations : Measuring Sustainable Development in the New Millennium," World Bank Publications - Books, The World Bank Group, number 2252.
    7. Charles I. Jones & Peter J. Klenow, 2016. "Beyond GDP? Welfare across Countries and Time," American Economic Review, American Economic Association, vol. 106(9), pages 2426-2457, September.
    8. Marc Fleurbaey & Guillaume Gaulier, 2009. "International Comparisons of Living Standards by Equivalent Incomes," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(3), pages 597-624, September.
    9. Laurens Cherchye & Wim Moesen & Tom Van Puyenbroeck, 2004. "Legitimately Diverse, yet Comparable: On Synthesizing Social Inclusion Performance in the EU," Journal of Common Market Studies, Wiley Blackwell, vol. 42(5), pages 919-955, December.
    10. Laurens Cherchye & Willem Moesen & Nicky Rogge & Tom Puyenbroeck, 2007. "An Introduction to ‘Benefit of the Doubt’ Composite Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 82(1), pages 111-145, May.
    11. Despotis, D.K., 2005. "Measuring human development via data envelopment analysis: the case of Asia and the Pacific," Omega, Elsevier, vol. 33(5), pages 385-390, October.
    12. Dasgupta, Partha, 2001. "Human Well-Being and the Natural Environment," OUP Catalogue, Oxford University Press, number 9780199247882.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vincenzo Patrizii & Anna Pettini & Giuliano Resce, 2017. "The Cost of Well-Being," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(3), pages 985-1010, September.
    2. Hideyuki Mizobuchi, 2017. "Incorporating Sustainability Concerns in the Better Life Index: Application of Corrected Convex Non-parametric Least Squares Method," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(3), pages 947-971, April.
    3. Dovile Stumbriene & Ana S. Camanho & Audrone Jakaitiene, 2020. "The performance of education systems in the light of Europe 2020 strategy," Annals of Operations Research, Springer, vol. 288(2), pages 577-608, May.
    4. Amado, Carla A.F. & São José, José M.S. & Santos, Sérgio P., 2016. "Measuring active ageing: A Data Envelopment Analysis approach," European Journal of Operational Research, Elsevier, vol. 255(1), pages 207-223.
    5. Jesús Peiró-Palomino & Andrés J. Picazo-Tadeo, 2018. "Assessing well-being in European regions. Does government quality matter?," Working Papers 2018/06, Economics Department, Universitat Jaume I, Castellón (Spain).
    6. Laurens CHERCHYE & Willem MOESEN & Nicky ROGGE & Tom VAN PUYENBROECK, 2009. "Constructing a knowledge economy composite indicator with imprecise data," Working Papers of Department of Economics, Leuven ces09.15, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    7. Jorge Guardiola & Andrés J. Picazo-Tadeo, 2013. "Weighting life domains with Data Envelopment Analysis," Working Papers 1311, Department of Applied Economics II, Universidad de Valencia.
    8. Nicky Rogge & Ilse Nijverseel, 2019. "Quality of Life in the European Union: A Multidimensional Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 141(2), pages 765-789, January.
    9. Fusco, Elisa & Maggi, Bernardo & Rizzuto, Livia, 2022. "Alternative indicators for the evaluation of renewables in Europe: An efficiency approach," Renewable Energy, Elsevier, vol. 190(C), pages 48-65.
    10. Jorge Guardiola & Andrés Picazo-Tadeo, 2014. "Building Weighted-Domain Composite Indices of Life Satisfaction with Data Envelopment Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 117(1), pages 257-274, May.
    11. Jesús Peiró-Palomino & Andrés J. Picazo-Tadeo, 2018. "OECD: One or Many? Ranking Countries with a Composite Well-Being Indicator," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(3), pages 847-869, October.
    12. Francesco Vidoli & Elisa Fusco & Claudio Mazziotta, 2015. "Non-compensability in Composite Indicators: A Robust Directional Frontier Method," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 122(3), pages 635-652, July.
    13. Zanella, Andreia & Camanho, Ana S. & Dias, Teresa G., 2015. "Undesirable outputs and weighting schemes in composite indicators based on data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 245(2), pages 517-530.
    14. Salvatore Greco & Alessio Ishizaka & Menelaos Tasiou & Gianpiero Torrisi, 2019. "On the Methodological Framework of Composite Indices: A Review of the Issues of Weighting, Aggregation, and Robustness," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 141(1), pages 61-94, January.
    15. Fusco, Elisa & Vidoli, Francesco & Sahoo, Biresh K., 2018. "Spatial heterogeneity in composite indicator: A methodological proposal," Omega, Elsevier, vol. 77(C), pages 1-14.
    16. Laurens Cherchye & Willem Moesen & Nicky Rogge & Tom Puyenbroeck, 2007. "An Introduction to ‘Benefit of the Doubt’ Composite Indicators," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 82(1), pages 111-145, May.
    17. P. Zhou & B. Ang, 2009. "Comparing MCDA Aggregation Methods in Constructing Composite Indicators Using the Shannon-Spearman Measure," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 94(1), pages 83-96, October.
    18. Tom Puyenbroeck, 2018. "On the Output Orientation of the Benefit-of-the-Doubt-Model," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(2), pages 415-431, September.
    19. Hideyuki Mizobuchi, 2017. "Measuring Socio-economic Factors and Sensitivity of Happiness," Journal of Happiness Studies, Springer, vol. 18(2), pages 463-504, April.
    20. Vincent Charles & Guillermo Díaz, 2017. "A Non-radial DEA Index for Peruvian Regional Competitiveness," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(2), pages 747-770, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:soinre:v:118:y:2014:i:3:p:987-1007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.