The Importance of Variables in Composite Indices: A Contribution to the Methodology and Application to Development Indices
- 22 Downloads
The paper examines the issue of weights and importance in composite indices of development. Building a composite index involves several steps, one of them being the weighting of variables. The nominal weight assigned to a variable often differs from the degree to which the variable affects the scores of the overall index. The newly suggested notion of importance is based on the idea that an important indicator, if omitted from the index, causes large changes in countries’ results. We propose a method of measuring the importance and apply it to inequality variables in composite indices of development. The results show a low importance for most inequality variables, and for some of them, a large discrepancy between the nominal weights and the importance. We argue that the importance of variables should be considered in the process of index construction. This may imply a modification of the index when there is a large discrepancy between the nominal weights and importance and when the importance of some variables is extremely low. Whether any such modification is justified must be decided within the context of the particular index.
KeywordsComposite indicator Composite index Importance Weighting Development indicator Inequality
Commitment to Development Index
Environmental Performance Index
Human Development Index
Index of Inequality-Adjusted Happiness
Index of Economic Well-being
Inequality-adjusted Human Development Index
Measure of absolute importance
Modified composite index
Measure of relative importance
Original composite index
Principal component analysis
Organisation for Economic Co-operation and Development
Sustainable Society Index/Human Well-being component
United Nations Development Programme
World Happiness Index/Quality of Life component
Funding was provided by Univerzita Palackého v Olomouci (Grant No. IGA_PrF_2019_025).
- Alkire, S., & Foster, J. (2010). Designing the inequality-adjusted human development index. OPHI working paper 37. Oxford: Oxford Poverty & Human Development Initiative.Google Scholar
- Alkire, S., & Robles, G. (2017). Multidimensional poverty index summer 2017: Brief methodological note and results. MPI methodological notes 44. Oxford: Oxford Poverty & Human Development Initiative.Google Scholar
- Anderberg, M. R. (1973). Cluster analysis for applications. New York: Academic Press Inc.Google Scholar
- Bandura, R. (2008). A survey of composite indices measuring country performance: 2008 update. UNDP/ODS working paper. New York, NY: Office of Development Studies, United Nations Development Programme.Google Scholar
- Becker, W., & Saltelli, A. (2015). Design for sensitivity analysis. In A. Dean, M. Morris, J. Stufken, & D. Bingham (Eds.), Handbook of design and analysis of experiments (pp. 627–674). Boca Raton: Chapman & Hall/CRC Press.Google Scholar
- de Kruijk, H., & Rutten, M. (2007). Weighting dimensions of poverty based on people’s priorities: Constructing a composite poverty index for the maldives. IIDE discussion paper 2007 08-01. Rotterdam: Institute for International & Development Economics.Google Scholar
- Decancq, K., & Lugo, M. A. (2010). Weights in multidimensional indices of well-being: An overview. https://lirias.kuleuven.be/bitstream/123456789/262767/1/DPS1006.pdf. Accessed January 2, 2018.
- Gini, C. (1912). Variabilità e Mutuabilità. Contributo allo Studio delle Distribuzioni e delle Relazioni Statistiche. Bologna: C. Cuppini.Google Scholar
- Ginsberg, N., Osborn, J., & Blank, G. (1986). Geographic perspectives on the wealth of nations. Department of Geography research paper no. 220. Chicago: University of Chicago.Google Scholar
- Globeco. (2001). L´indice Globeco du Bonheur Mondial. http://www.globeco.fr/images/PDF/BMB/bonheur-mondial-2001.pdf. Accessed February 21, 2017.
- Globeco. (2016). Bonheur mondial. Edition 2016. http://globeco.fr/images/PDF/BMB/bonheur-mondial-2016.pdf. Accessed January 22, 2017.
- Gorsuch, R. L. (1974). Factor analysis. Philadelphia: W.B Saunders.Google Scholar
- Hsu, A., Johnson, L. A., & Lloyd, A. (2013). Measuring progress: A practical guide from the developers of the environmental performance index (EPI). New Haven: Yale Center for Environmental Law & Policy.Google Scholar
- Hume, D. (1740). A treatise of human nature. London: Penguin Books. (reprinted in 1985).Google Scholar
- Käppeli, A., Hillebrandt, H., & Mitchell, I. (2017). The commitment to development index: 2017 edition. Methodological overview paper. Washington, D.C.: Center for Global Development.Google Scholar
- Kuznets, S. (1955). Economic growth and income inequality. American Economic Review, XLV(1), 1–28.Google Scholar
- Osberg, L., & Sharpe, A. (1998). An index of economic well-being for Canada. Research report. Human Resources Development Canada. http://www.csls.ca/iwb/articles.asp. Accessed January 2, 2017.
- Osberg, L., & Sharpe, A. (2016a). Database of the index of economic well-being for selected OECD countries and Alberta, 1980–2014. Centre for the Study of Living Standards. http://www.csls.ca/iwb/oecd.asp. Accessed February 21, 2017.
- Osberg, L., & Sharpe, A. (2016b). Database of the index of economic well-being for Canada and the provinces, 1981–2014. Centre for the Study of Living Standards. http://www.csls.ca/iwb/prov.asp. Accessed February 21, 2017.
- Pearson, K. (1905). On the general theory of skew correlation and non-linear regression. London: Dulau & Co.Google Scholar
- Saisana, M., & Tarantola, S. (2002). State-of-the-art report on current methodologies and practices for composite indicator development. Ispra: Joint Research Centre.Google Scholar
- Salzman, J. (2003). Methodological choices encountered in the construction of composite indices of economic and social well-Being. Research paper. http://www.csls.ca/events/cea2003/salzman-typol-cea2003.pdf. Accessed February 23, 2017.
- Sustainable Society Foundation. (2016a). Calculation formulas of the Sustainable Society Index, SSI-2016. http://www.ssfindex.com/ssi2014/wp-content/uploads/pdf/calculation_formulas-2016.pdf. Accessed February 23, 2017.
- Sustainable Society Foundation. (2016b). SSI 2016. http://www.ssfindex.com/ssi2016/wp-content/uploads/pdf/ssi2016.pdf. Accessed February 23, 2017.
- UNDP (United Nations Development Programme). (2014). Human development report 2014. Sustaining human progress: Reducing vulnerabilities and building resilience. Washington DC: Communications Development Incorporated.Google Scholar
- UNDP (United Nations Development Programme). (2016). Human development report 2016: Human development for everyone. Washington DC: Communications Development Incorporated.Google Scholar
- Veenhoven, R. (2003). Equality-adjusted happiness in nations. In Paper presented at the conference of the International Society for Quality of Life Studies (ISQOLS), Frankfurt (DE).Google Scholar
- Veenhoven, R. (2017). Inequality-adjusted happiness in 159 nations 2005–2014. World Database of Happiness. https://worlddatabaseofhappiness.eur.nl/hap_nat/findingreports/RankReport_InequalityHappiness.php. Accessed March 23, 2017.
- Wilkinson, R., & Pickett, K. (2009). The spirit level: Why greater equality makes societies stronger. New York, NY: Bloomsbury.Google Scholar
- Yang, L. (2014). An inventory of composite measures of human progress. United Nations Development Programme, Human Development Report Office. http://hdr.undp.org/sites/default/files/inventory_report_working_paper.pdf. Accessed 23 Mar 2017.