Potential improvements approach in composite indicators construction: The Multi-directional Benefit of the Doubt model

The aim of the present paper is to propose an innovative method to construct composite indicators, starting from an attractive frontier approach called Multi-directional Efficiency Analysis (MEA), and making it suitable to aggregate simple indicators. The main advantage of this method is the separation of the benchmark selection issue from that of efficiency measurement. The novel method, called Multi-directional Benefit of the Doubt, combines the MEA with the Benefit of the Doubt approach adding some valuable properties to the obtained composite indicator. The proposed method is tested on simulated data for illustrative purposes, and then, an empirical application on OECD ”Better life index” is provided. Results suggest that the method could be a good tool for local policy makers alongside the OECD BLI to investigate and improve some non-performing well-being dimensions.