Measuring Italian well-being by modified TOPSIS (Tecnique for Order Preference by Similarity to Ideal Solution)

Well-being has always been a matter of debate for researchers. From an operational perspective, however, is common to treat well-being as a multidimensional concept: each dimension represents an aspect to be described by means of different indicators able to characterize it. For each dimension composite indexes are then obtained by aggregating and weighting the relevant indicators. This paper attempts to measure the well-being of Italian Regions using composite indexes of eleven dimensions. Zeleny's compromise solution concept and a modified TOPSIS (Tecnique for Order Preference by Similarity to Ideal Solution) method of compromise ranking (Zeleny, 1982; Hwang e Yoon, 1981) are used. TOPSIS is a methodological tool capable of handling conflicting situations between dimensions, relations between indicators and incomparable units (Antucheviciene et al,2010). The fundamental of TOPSIS is that doesn't exist in real life a “Pareto solution”; in the context of regional well-being assessment this means that is never happens that all indicators will be at their best level for the same region, even for a single dimension: a compromise solution is needed. The basic principle of TOPSIS is the following: the region that ranks best is the closest to the ideal solution and the most distant from the negative ideal solution. The ideal solution is the set of all the best values achievable by each indicator within a specific dimension (profit indicators the maximum, cost indicators the minimum); on the contrary, negative ideal solution is the set of all the worst achievable values (profit indicators the minimum, cost indicators the maximum). In this paper TOPSIS method has been modified as regards normalization criteria and weighting system. The procedure of the Shannon's entropy (Shannon CE., Weaver W., 1947) and the Mahalanobis distance, instead of Euclidean distance, have been used. The source of data is ISTAT (Italian National Institute of Statistics). Empirical results confirm the existence of a lot of disparities between Italian Regions in all the considered dimensions of well-being. The ranking operation provides a priority list of regions needing of urgent and strong actions in one or more dimensions to improve regional and national well-being.