University of Hertfordshire

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  • S131

    Final published version, 845 KB, PDF document

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Original languageEnglish
PublisherUniversity of Hertfordshire
Pages32
Publication statusPublished - 2012

Publication series

NameUH Business School Working Paper
PublisherUniversity of Hertfordshire

Abstract

Perhaps the most difficult aspect of constructing a multi-dimensional index is that of choosing weights for the components. This problem is often bypassed by adopting the ‘agnostic’ option of equal weights, as in the Human Development Index. This is an annual ranking of countries produced by the United Nations Development Programme based on life expectancy, education, and per capita gross national income. These three dimensions are now aggregated multiplicatively. Whatever weights (exponents) are chosen for these dimensions, some nations will feel disadvantaged. To avoid the use of arbitrary weights we propose for consideration a two-step approach: (1) Find the most advantageous set of weights for each nation in turn. (2) Regress the associated optimal scores on the underlying indicators to find a single weight set. This approach has the properties of non-subjectivity, fairness, and convenience. The result is that the highest weight is placed on the life expectancy dimension.

Notes

Final version of the paper has been accepted for publication in Journal of Population Economics

ID: 958054