Benchmarking Sustainable Development: A Synthetic Meta-Index Approach Laurens Cherchye (Catholic University of Leuven, Belgium) Timo Kuosmanen (Wageningen University, The Netherlands) WIDER International Conference on Inequality, Poverty and Human Well-being, Helsinki, 30-31 May 2003

What is Sustainable Development? The Brundlant Commission Report (1987) gives the standard definition SD="Meeting the needs of the present without compromising the ability of future generations to meet their own needs” Aspects of SD: Economic, Social/Political, Environmental

Environmental Sustainability Index 2002 An Initiative of the Global Leaders for Tomorrow Environment Task Force, World Economic Forum

From WEF (2002): “Strengths of ESI + Measures Environmental Sustainability + Permits cross-country comparisons + Method is transparent, reproducible + Enhances capacity to benchmark performance, guide policy, deepen understanding Weaknesses - Assumes particular set of weights (!) - Suffers from gaps in available data - Lacks time series data which limits ability to identify policy drivers”

“Data Envelopment Analysis” (DEA) weighting

Related studies Zaim, Färe, Grosskopf (2001) Soc. Ind. Res. DEA based achievement and improvement indexes Mahlberg & Obersteiner (2001), IIASA report Re-measuring HDI by DEA

Points of departure Broader scope of SD that accounts for economic, social-political, and environmental aspects Meta-level approach (index of indices) Emphasis on developing a weighting mechanism which neither specifies weights a priori nor allows for any weights that show the country in positive light (weight-restricted DEA).

Weight-restricted DEA

DEA-based SD index: definition

3 types of weight restrictions: Relative weight between 2 SD indicators (h,i) for a given country j Relative weight between SD categories (k,l) for a given country j Relative weight of the given indicator i between 2 countries (j,k)

Components of our meta-index:

Weights

MISD rankings, High-income countries (>$9266/cap.)

MISD rankings, Upper-middle-income countries

MISD rankings, Lower-middle-income countries

MISD rankings, Low-income countries

MISD versus GDP/capita

Conclusions DEA appears a promising tool for weighting multiple dimensions of SD to identify benchmarks. Normative judgement on min/max bounds for weights seems less controversial than choice of any specific set of weights. Weight flexibility can be restricted across SD outputs, but also across output categories and countries.

Challenges for future research Constructing a ‘superior’ SD index directly from measures and indicators, rather than using aggregated indices. Dynamic index: Measuring a rate of change in the stock variables, instead of mixing up stocks and flows. A Malmquist index approach.

Full paper available Download in pdf form from my homepage: http://www.sls.wau.nl/enr/staff/kuosmanen/ Or send e-mail to: Timo.Kuosmanen@wur.nl