Composite indicators may be used to measure complex variables which are not directly measurable. The basic idea is to break down a latent variable into components which can be measured by means of simple (partial) indicators. The partial indicators are then combined to obtain a composite indicator. This paper discusses the development of composite indicators and their robustness. In particular, the comparison of different methods to construct composite indicators is addressed. A Monte Carlo simulation study is performed to evaluate the different methods.
A Comparison of Different Methods for the Construction of Composite Indicators
MAROZZI, Marco
2005-01-01
Abstract
Composite indicators may be used to measure complex variables which are not directly measurable. The basic idea is to break down a latent variable into components which can be measured by means of simple (partial) indicators. The partial indicators are then combined to obtain a composite indicator. This paper discusses the development of composite indicators and their robustness. In particular, the comparison of different methods to construct composite indicators is addressed. A Monte Carlo simulation study is performed to evaluate the different methods.
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