Page 42 - Contributed Paper Session (CPS) - Volume 4

CPS2111 Grant J. Cameron et al.
In this paper, we aim at laying out the conceptual foundation behind
statistical capacity indexes, and construct a new index based on practical and
theoretical considerations. We review existing measurement methodologies,
posit desired attributes, and propose updated indicators, and an updated
Statistical Capacity Index (hereafter referred to as the Statistical Performance
Index, or SPI). On the empirical front, we expand the number of indicators in
the old SCI by almost twice, and we extend the sample of covered countries
by one-half to all countries in the world.

2. Methodology
In order to construct a measure that is policy relevant it is helpful to follow
a series of basic steps.
6
The first step asks the question: what phenomenon is being measured? A
clear conception helps orient the process by which the measure is assembled
and will prove valuable in communicating its underlying meaning.
The second step asks: for what purpose or purposes is the index being
sought? Knowing how the index will be used can greatly affect subsequent
choices in its construction, and its eventual suitability. In particular, it will help
define the unit of analysis both for data gathering and reporting purposes.
The third step identifies a list of essential characteristics, or desiderata,
that the methodology should exhibit. This list of “pre-axioms” helps orient the
construction process and define what success means.
A fourth step identifies the conceptual space in which measurement is to
take place. If there are multiple conceptual dimensions, consideration must
also be given to the relative importance of each.
The fifth step selects the form of the variables to be used and the
aggregation method to be employed – how the variables are to be combined
into an overall measure.
The sixth step identifies a set of axioms that the resulting index should
satisfy to have the greatest practical utility. Axioms are not sterile
mathematical requirements, but rather contain the salient nuggets of policy
required of the index: which aspects of the data should be ignored, which
should be reflected, and helpful consistency requirements over subsets of
data. Together, these six steps comprise the core theoretical elements of our
proposed measurement technology.
We briefly summarize the main ideas of the sixth step in our proposed
methodology below. Interested readers are referred to the full version of the
paper for more discussion and further technical details on the other steps; the
equation and section numbers below refer to those in the full paper version.

6 This process is similar for many types of measurement exercises. See for example Alkire et al. (2015) in
the context of multidimensional poverty measurement.
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