Abstract

Research background: Composite indicators are commonly used not only to measure economic development, the standard of livin g, competitiveness, fairness, effectiveness but are also willingly implemented in to many different fields. How- ever, it seems that in most cases the variable weig hting procedure is avoided or erroneous since in most cases so-called “wights by belief” are applied. As re- searches show, it can be frequently observed that w eights do not equal importance in composite indicators. As a result, biased rankin gs or grouping of objects are obtained. Purpose of the article: The primary purpose of this article to optimise and im- prove the Human Development Index which is the most commonly used composite indicator to rank countries in terms of their socio -economic development. Methods: In order to achieve the purpose mentioned above, th e sensitivity analysis tools (mainly the firsts order sensitivity index) w ere used to determine the appro- priate weights in the Human Development Index. Base d on the adjusted weights, a new ranking of countries was established and compil ed with the initial ranking. Findings & Value added: It has been shown that HDI is built incorrectly by put- ting equal weights for all four components. The wei ghts proposed by the sensitivity analysis better reflect the actual contribution of individual factors to HDI variabil- ity. Improved Human Development Index constructed b ased on proposed weights allow for better differentiation of countries due t o socio-economic development

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