A generalized composite index based on the non-substitutability of individual indicators

Abstract

Composite indices for ranking territorial units are widely used by many international organizations in order to measure economic, social and environmental phenomena. The literature offers a great variety of aggregation methods, all with their pros and cons. In this chapter, we propose an alternative composite index which, starting from a linear aggregation, introduces penalties for the units with “unbalanced” values of the indicators. As an example of application, we consider the set of individual indicators of the Technology Achievement Index (TAI) and present a comparison between some traditional methods and the proposed index.