Assessing Urban Sustainable Competitiveness and Happiness From the Perspective of Socio‐Economic Environment

ABSTRACT This study examines the sustainable competitiveness of Taiwan's 22 counties and cities between 2016 and 2020. We develop and apply a parallel dynamic two‐stage slacks‐based measure data envelopment analysis framework that integrates Shannon entropy to measure sustainability performance across social, economic, and environmental dimensions, and to evaluate how effectively these outcomes translate into residents' quality of life. Our approach consolidates multiple indicators into subsystem‐specific measures while directionally adjusting for undesirable outputs—such as pollution, waste, and crime—thus ensuring that efficiency estimates fully reflect these critical constraints. The results reveal that persistent inefficiency in the economic subsystem represents the main barrier to sustainable competitiveness. In contrast, environmental governance and social inclusion exhibit a stronger, more direct relationship with well‐being. Spatial regression models further indicate that differences in quality of life are primarily explained by local governance capacity, with limited spillover effects from neighboring regions. A striking finding is that smaller, less industrialized jurisdictions frequently outperform major metropolitan areas, indicating that sustainable competitiveness stems not from administrative scale, but from balanced advancement across all sustainability domains. This study provides an integrated and methodologically consistent framework that helps clarify the linkages between sustainability performance and well‐being. The findings provide empirically grounded insights that can help policymakers promote urban sustainability and contribute to achieving the UN Sustainable Development Goals.