A contribution to the comparative evaluation of efficiency indicators in eurozone using DEA methodology.

Abstract

This study proposes a methodological framework for the construction of composite sustainability indicators. To be more specific, it suggests the application of an operations research technique, namely Data Envelopment Analysis (DEA), to weigh and aggregate economic, environmental, and social indicators into composite indices in such a way that diminishes the contingent bias that is linked with assigning weights. These indices are used to assess the intricate notion of sustainability efficiency of 20 Eurozone members comparatively, aiming to share valuable information for policymakers and governing bodies, helping them to make more informed decisions and eventually enhance the sustainability performance of the countries under assessment. A literature review of 25 papers about DEA and sustainability for the years 2021 to 2023 was carried out to select the indicators that were used in the study. The data used were retrieved from Eurostat and the World Bank databases. Afterwards, the chosen indicators were implemented under two DEA variations (classic and SBM) and 10 different scenarios, which generated 10 final indices. Those indices are separated into three sustainability indices, six eco-efficiency indices, and one socio-economic index. Ireland, Luxembourg, and Malta attained maximum efficiency scores across all sustainability scenarios, while Ireland and Luxembourg were deemed efficient under all of the eco-efficiency variations. Finally, the results of the sustainability scenarios may indicate that most of the Eurozone members do not get close to their potential output levels (GDP and Overall Life Satisfaction) in terms of their available labor force.