Measuring Productivity and Growth Within a Broader Development Concept of Sustainability, Equitability and Democracy using Data Envelopment Analysis
Bernhard Mahlberg, Vienna University of Economics and Business Administration and Michael Obersteiner, International Institute for Applied Systems Analysis
Development, be it ‘sustainable’ of ‘economic, represents a transformation of society, a movement from traditional relations, traditional ways of thinking, traditional ways of dealing with health and education, traditional methods of production, to more “modern” ways. It recognizes that we, as individuals and societies, can take actions that, for instance, reduce infant mortality, extend lifespans, improve ambient air quality, widen individual liberties or increase productivity. Key to these changes is the movement to “scientific” ways of thinking, identifying critical variables that affect outcomes, attempting to make inferences based on available data, recognizing what we know and what we do not know. However, the goals of the transformation process are still poorly defined and societal processes including economic activities are not completely understood. So for example economic policies took privatization and trade liberalization as ends in themselves, rather than as means to more sustainable, equitable, and democratic growth.
In this paper we empirically try to estimate productivity and growth of the economies of the world by selected indicators measuring sustainability, equity, and the state of democratic rights and civil liberties. We use models from the Data Envelopment Analysis (DEA) literature to compare productivity levels in a multiple input – output setting. This productivity level can then be interpreted as a new human development indicator. In fact in one I/O relation we re-estimate with DEA the human development index by using the indicators that define the index. However, indices for a number of alternative I/O relationships are estimated and compared. Growth is measured by shifts of the ‘efficient’ hull of frontier countries that show the smallest I/O ratios in this multiple criteria environment. Country clusters that are similar to each other in their transformational pattern are identified, while also interesting outliers can be singled out. Such outliers are either frontier societies or countries that are locked in an underdevelopment trap. Finally we discuss the key principles of a development strategy that are based on broader criteria and indicators on the transformation of societies.