A DEA Approach to Measure the Quality-of-Life in the Municipalities of the Canary Islands

The notion of the quality of life has always intrigued economists, sociologists and other researchers in the area of social science. Since the genesis of the definition of Gross Domestic Product (GDP) as a truthful measure of well-being and economic development, other sophisticated methodologies have been proposed in the literature to measure the quality-of-life (QOL) that extend in a multidimensional way this complex concept. Measuring QOL in municipalities consists in finding a set of comparable attributes that can be weighted by some metric in order to construct a synthetic index. Thus, the narrow vision obtained by a single measure as the GDP, in which differences in the QOL cannot be fully analyzed, is overcome. Based upon a refinement of data envelopment analysis (DEA)—the cross-efficiency method, the current paper develops a synthetic QOL index that is based in 19 partial indicators which present the tradeoffs of different dimension for the 87 municipalities of the Canary Islands in Spain. Marginal rates of substitution are calculated to evaluate the tradeoffs on QOL dimensions. A method is also proposed to determine the scores chart of each municipality which can be used as a tool to policy makers in order to establish a program of improving the ranking position of the municipality identifying the critical QOL factors.