The Measurement of Macroeconomic Performance: Comparison of DEA-Based Alternatives

It is common practice to summarise the macroeconomic performance of countries in terms of the four well-known dimensions captured by the magic diamond of the OECD. This paper provides a comparison of several synthetic indicators which merge the four separate indicators into one single statistic. These indicators are inspired by data envelopment analysis (DEA)-based models, which allow an unequal weighting of the different economic objectives. The calculated weights then act as proxies for the true policy priorities. Comparison of the models focuses on the underlying assumptions as well as on the empirical results they generate.