Composite indicators for measuring well-being of Italian municipalities

Well-being is a complex phenomenon. Multidimensionality is recognized in literature as its main feature. This phenomenon is in some aspects elusive and difficult to monitor, and the definition is the combination of heterogeneous components, which assume different meanings in different contexts. A universally accepted definition of well-being does not exist (yet): each country (or areas) attributes importance to dimensions that for others may not be as relevant, consistent with their culture and social dynamics. Accurate measurement of well-being is a prerequisite for the implementation of effective welfare policies, which, through targeted actions in the most critical areas, are geared to the progressive improvement of living conditions. Until some time ago, such a plurality of components was poorly valued, believing that the only income dimension could represent in an exhaustive way such a complex reality. For many years, GDP (Gross Domestic Product) has been an indisputable landmark for states all over the world, playing the key role in defining, implementing and evaluating the effects of government action. Recently, the international debate has questioned the supremacy of GDP, and initiatives have been launched which, through the involvement of a growing number of countries, aim to develop alternative ways of measuring well-being that assign the same value to its components, Economic, Social and Environmental. Since well-being, as mentioned above, is a multidimensional phenomenon then it cannot be measured by a single descriptive indicator and that it should be represented by multiple dimensions. It requires, to be measured, the “combination” of different dimensions, to be considered together as components of the phenomenon (Mazziotta and Pareto, 2013). This combination can be obtained by applying methodologies known as composite indicators (Salzman, 2003; Mazziotta and Pareto, 2011; Diamantopoulos et al., 2008). In this ever-evolving scenario, the Italian experience is represented by the BES (Equitable and Sustainable Well-Being) project that is now considered globally as the most advanced experience of study and analysis. It consists in a dashboard of 134 individual indicators distributed in 12 domains. In the last three BES reports, published in December 2015, 2016 and 2017 by Istat (Italian Institute of Statistics) (Istat, 2015; Istat, 2016; Istat 2017), composite indicators at regional level and over time were calculated for the 9 outcome domains, creating a unique precedent in the official statistics at international level. Recently, the debate has become from a scientific to a policy scope: parliamentary and local administrators are affirming the necessity to link the Istat well-being indicators to interventions/actions in the socio-economic field, thus constructing an even stronger connection between official statistics and policy evaluation. In fact, the Italian Parliament has finally approved on 2016 July 28 the reform of the Budget Law, in which it is expected that the BES indicators, selected by an ad hoc Committee, are included in the Document of Economics and Finance (DEF). The new regulations also provide that by February 15th of each year Parliament receives by the Minister of Economy a report on the evolution of the BES indicators. A Committee for equitable and sustainable well-being indicators is established, chaired by the Minister of Economics and composed by the President of Istat, the Governor of the Bank of Italy and two experts coming from universities or research institutions (Mazziotta, 2017). The project, from national, is becoming local and already several local authorities, although they not have legislative obligations, are studying the well-being indicators of their territory. With these assumptions, it seems necessary to calculate well-being measures for all Italian municipalities so that administrators and citizens can dispose of them to understand and decide better policies. Since the current statistical surveys do not provide socio-economic indicators disaggregated at municipalities level (Census is the only source, every ten years and it does not collect all the information contained in the BES), it is necessary to use administrative sources, hopefully, collected in informative systems. The thesis wants to present an experimental statistics conducted on all the municipalities of Italy where nine domains of BES are selected (Population, Health, Education, Labour, Economic well-being, Environment, Economy on the territory, Research and Innovation, Infrastructure and Mobility) and the twenty individual indicators are selected so that they can represent the phenomenon at the municipal level. The individual indicators are calculated starting from administrative sources and then composite indicators are computed in order to have a unidimensional measure. The theoretical framework adopted is represented, therefore, by the conceptual and methodological one developed by Istat and CNEL (National Council of Economy and Labour) for the BES project (Istat, 2015). The structure of the domains and the selection of indicators are derived from the national BES. In each of the domains, some individual indicators are selected so that the starting matrix has 7,998 rows (the municipalities) and a variable numbers of columns (the indicators). A Composite indicator for each domain is calculated and then a unique composite indicator that synthesizes all the composite indicators is computed. Different composite indicators are calculated in order to assess the robustness of the methodologies. The results present interesting reflections also in the key of economic planning. Therefore, the aim of the thesis is to provide socio-economic indicators for measuring well-being at the municipal level. To achieve this goal it is necessary to define a theoretical framework, to build indicators matrix at the municipal level, to calculate composite indicators in order to obtain a simpler reading and interpretation of the data. The four chapters of the paper are designed to answer these research questions. The thesis is divide in two parts. The first, Theories and Methods, is composed by two chapters: “Theoretical framework: GDP versus well-being” in which recent well-being theories are presented with a view to supporting GDP; “Composite indicators: theories and methods” in which all the techniques for constructing composite indicators are presented in order to understand how synthesize data and measure multidimensional socio-economic phenomena. The second part, “Application to administrative data”, is composed by two chapters: Administrative data sources in which the data base ARCHIMEDE is described; Well-being of Italian municipalities where a robust composite indicator is applied to the domains and individual indicators in order to have a measure of well-being for all Italian municipalities. The analysis of the results leads to original conclusions in which the application of particular data classification methodologies contributes to the discussion concerning the use of databases from administrative sources for local economic planning based on well-being.