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Undesirable specialization in the construction of composite policy indicators: The Environmental Performance Index

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  • Rogge, Nicky

    (Hogeschool-Universiteit Brussel (HUB))

Abstract

The non-parametric Data Envelopment Analysis approach is increasingly used to construct composite indicators for country performance monitoring, benchmarking, and policy evaluation in a large variety of fields. The flexibility in the definition of aggregation weights is praised as the method's most important advantage: DEA allows each evaluated country to look for its own optimal weights that maximize the composite indicator relative to the other countries. However, this flexibility also carries a potential disadvantage as it may allow countries to appear as a brilliant performer in a manner that is hard to justify: by ignoring or overemphasizing one or multiple of the judiciously selected performance indicators. To illustrate this issue of undesirable specialization in DEA-based evaluations, this paper compares the Environmental Performance Index (EPI) as computed by the optimistic and pessimistic version of the DEA-model as proposed by Zhou et al. (2007). Based on both computed composites, undesirable specialization in performance is identified.

Suggested Citation

  • Rogge, Nicky, 2012. "Undesirable specialization in the construction of composite policy indicators: The Environmental Performance Index," Working Papers 2012/08, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    • Handle: RePEc:hub:wpecon:201208
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    Keywords

    Data envelopment analysis; benefit of the doubt; Composite indicators; Expert opinion; Undesirable specialization; Environmental Performance Index;
    All these keywords.

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