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Methodological challenges in building composite indexes: Linking theory to practice

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  • Santeramo, Fabio Gaetano

Abstract

Composite indicators are emerging in several fields and disciplines as appealing method to synthesize a multitude of information, in a compact, single, and unique way. The process of aggregating heterogeneous information is itself very challenging and exposed to numerous threats. The chapter deepens on the methodological challenges that scientists, analysts, and final users must be aware of for a correct interpretation of the composite indexes. By mean of a worked example on the construction of composite indicators for food security, the chapter concludes that while different normalization and weighting approaches do not alter composite indicators, data imputation and aggregation methods are the most crucial steps: different methods convey very different results. For instance, the adoption of different aggregation procedures may largely alter the rankings based on composite indicators. In sum, the analysis shows that the index construction decisions matter and comment on policy and practical implications for the construction of composite indicators.

Suggested Citation

  • Santeramo, Fabio Gaetano, 2016. "Methodological challenges in building composite indexes: Linking theory to practice," MPRA Paper 73276, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:73276
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    1. Santeramo, Fabio Gaetano & Carlucci, Domenico & De Devitiis, Biagia & Seccia, Antonio & Stasi, Antonio & Viscecchia, Rosaria & Nardone, Gianluca, 2017. "Emerging trends in European food, diets and food industry," MPRA Paper 82105, University Library of Munich, Germany.

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    More about this item

    Keywords

    Composite Indicator; Food Security; Data Aggregation; Data Imputation; Normalization; Weighting; FAO; Development; Economics;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • Q19 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Other

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