Tools for Composite Indicators Building
Our society is changing so fast we need to know as soon as possible when things go wrong
(Euroabstracts, 2003). This is where composite indicators enter into the discussion. A composite
indicator is an aggregated index comprising individual indicators and weights that commonly
represent the relative importance of each indicator. However, the construction of a composite
indicator is not straightforward and the methodological challenges raise a series of technical
issues that, if not addressed adequately, can lead to composite indicators being misinterpreted or
manipulated. Therefore, careful attention needs to be given to their construction and subsequent
use.
This document reviews the steps involved in a composite indicator’s construction process and
discusses the common pitfalls to be avoided. We stress the need for multivariate analysis prior to
the aggregation of the individual indicators. We deal with the problem of missing data and with
the techniques used to bring into a common unit the indicators that are of very different nature.
We explore different methodologies for weighting and aggregating indicators into a composite
and test the robustness of the composite using uncertainty and sensitivity analysis. Finally we
show how the same information that is communicated by the composite indicator can be
presented in very different ways and how this can influence the policy message.
NARDO Michela;
SAISANA Michaela;
SALTELLI Andrea;
TARANTOLA Stefano;
2005-12-07
JRC31473
EUR 21682 EN,
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