A Composite Index for Sustainable Development: Measurement and Development Status of Selected Countries

Abstract

Measuring and comparing development status among countries has long been a difficult task in economic analyses. Development analyses incorporating several aspects of sustainability are one of the most discussed concepts. The present study attempts to assess and measure the development status of various countries by developing a composite index for sustainable development. The measure comprises three sub-indices for economic, social, and environmental dimensions. For this purpose, separate sub-indices for economic, social, and environmental sustainability are designed and constructed to formulate a composite index for sustainable development. The study employs panel data to estimate the state of 140 countries for 1995-2020, taken from the World Bank. The sample includes 46 developed and 94 developing countries. The study utilized standard IMF index-construction methodology. The data is normalized by using the min-max method, and then the principal component analysis is applied for weighting selected variables. Finally, all weighted variables are aggregated to form up concerned indices. Selected countries were ranked based on their score obtained in all three dimensions and for the composite index. The study's findings highlighted high-income countries better in economic sustainability performance with greater environmental degradation. While low-income countries are also the lowest in economic sustainability, having lesser environmental damage. There are mixed results for social sustainability. The study recommends improvements in the economic and social dimensions of sustainability while maintaining environmental standards.