A multicriteria decision aid-based model for measuring the efficiency of business-friendly cities

Abstract

Local self-government has the task of enabling stable economic development, in addition to enabling a normal quality of life for citizens. This is why the state government should provide guidelines that will improve the local business climate, and by doing so enable local economic development. This can be done through the introduction of a business-friendly certification procedure, which is influenced by uncertain inputs and influences many output factors. Each local government has the important task of determining its rank of efficiency in this process. A number of methodologies developed to solve this problem are generally divided into two groups: Parametric and non-parametric. These two groups of methodologies could provide quite different results. Therefore, the purpose of this paper was to create a model using both approaches to achieve a balanced symmetrical approach that produces better results than each approach individually. For this purpose, the paper describes a multicriteria decision aid-based model of optimization to evaluate the effectiveness of this process, integrating classification, data envelopment analysis, and stochastic frontier analysis, as well as its application in a case study of business-friendly certification in the Republic of Serbia.