Composite Indicators: the Art of Mixing Apples and Oranges

We review the recent debate around the use of composite indicators for policy and the suggested requirements for their development (ie the need for robustness assessment in order to improve the defensibility of the message brought by the composite indicator). We discussed a good and a bad example of composite indicator, both appeared on the Financial Times in the second semester of 2007: the Sustainability of fiscal and ecological development CI, developed at Germany¿s Allianz Insurance and Dresdner Bank and a Governance Index developed by the World Bank and published in the annual report on World Governance Indicators. The case study tackled in this paper is the 2007 European e-business readiness index, a useful mechanism for comparing e-business Adoption and Use by firms in the various European countries. Finally, we show on the case study how to make robustness tests of the country rankings, to see whether differences in weights values provide or not consistent results in terms of rankings. We propose a way to visualize the results of the robustness test.JRC.G.9-Econometrics and statistical support to antifrau