We consider the optimality of the weighting scheme used to construct the Human Development Index (HDI) using an approach that relies on consistent tests for stochastic dominance efficiency. We consider consistent tests for stochastic dominance efficiency of a given index portfolio with respect to all possible indices constructed from a set of individual components. The test statistics and the estimators are computed using mixed integer programming methods. The results show that the equally weighted (fixed weights) HDI index is not optimal and that education by itself offers the best (optimal) indicator of welfare.
|Publication status||Published - 2009|
|Event||64th European Meeting of the Econometric Society - Barcelona, Spain|
Duration: 23 Aug 2009 → 27 Aug 2009
|Conference||64th European Meeting of the Econometric Society|
|Period||23/08/09 → 27/08/09|