DEA Assessment of Socio-economic Development of European Countries

Abstract

Research Question: The study is aimed to explore the achieved level of socio-economic development of European countries, providing their efficiency analysis. Motivation: Current trends in the social wellbeing quantification indicate the neediness to change the perception of growth that relies solely on economic performance and the requisite to develop new approaches in measuring societal progress that, in addition to economic, includes the social performance of the national economy. Modern concepts are designed to encompass both the economic aspect and social goals. Therefore, the purpose of this paper is to contribute to the development of a methodological approach that can be applied to assess the level of socio-economic development. Idea: The study has been developed with the main idea to empirically assess and quantify the socio-economic development of European countries in order to improve traditional performance measures, which are primarily focused on economic aspects, omitting other aspects of sustainability. Data: A sample of 32 European countries was empirically analysed based on the data on socio-economic development indicators in 2018 (employment rates, mean equivalised net income, GDP per capita PPS, and percentage of people at risk of poverty and social exclusion) obtained from EU Statistics on Income and Living Conditions (EU-SILC) and Eurostat database. Tools: The assessment of the achieved level of socio-economic development was carried out using a Data Envelopment Analysis (DEA) based on the BCC output-oriented model with four output variables. Findings: Most of the EU28 countries (26 out of 28) do not achieve satisfactory levels of socio-economic efficiency. Additionally, countries of Northern and Western Europe achieve greater socio-economic efficiency, compared to the countries of Southern Europe. Four countries have a satisfactory level of socio-economic efficiency (the Czech Republic, Luxembourg, Switzerland and Norway). Contribution: This paper contributes to the existing literature in the field of socio-economic sustainability assessment through testing of the model with empirical data on European countries.