K.U.Leuven, Faculty of Economics and Applied Economics : Department of Economics
CES - Discussion paper series (DPS) 03.01 pages:1-27
The Open Method of Coordination (OMC) intends to enhance EU member states’ performance with regard to social inclusion. In this context a set of commonly agreed performance indicators plays an important role. While the communicative power of a synthetic indicator has been recognised, several objections have been raised against such a construction. In this paper, we argue that a set of separate indicators can in principle be combined into one synthetic performance index without giving up on the notion of subsidiarity, and without fundamentally impairing the peer pressure incentives that constitute an important rationale for OMC. We complement the presentation of the conceptual framework with a number of empirical applications, thereby indicating how the basic method may be instrumental for policy benchmarking practice.