Non-Compensatory Composite Indicators for Ranking Countries: A Defensible Setting

Composite indicators for ranking countries are more and more popular in a variety of economic and policy domains such as industrial competitiveness, sustainable development, globalisation and innovation. As a consequence, improvements in the way these indicators are constructed and used seem to be a very important research issue from both the theoretical and operational points of view. This paper starts with an analysis of the axiomatic system underlying the mathematical modelling commonly used to construct composite indicators. Then a different methodological framework, based on non-compensatory rules, is developed. Main features of the proposed approach are: (i) the axiomatic syst em is made completely explicit, and (ii) the sources of technical uncertainty and imprecise assessment are reduced to the minimum possible degree.