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Multilevel index decomposition analysis: Approaches and application

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  • Xu, X.Y.
  • Ang, B.W.

Abstract

With the growing interest in using the technique of index decomposition analysis (IDA) in energy and energy-related emission studies, such as to analyze the impacts of activity structure change or to track economy-wide energy efficiency trends, the conventional single-level IDA may not be able to meet certain needs in policy analysis. In this paper, some limitations of single-level IDA studies which can be addressed through applying multilevel decomposition analysis are discussed. We then introduce and compare two multilevel decomposition procedures, which are referred to as the multilevel-parallel (M-P) model and the multilevel-hierarchical (M-H) model. The former uses a similar decomposition procedure as in the single-level IDA, while the latter uses a stepwise decomposition procedure. Since the stepwise decomposition procedure is new in the IDA literature, the applicability of the popular IDA methods in the M-H model is discussed and cases where modifications are needed are explained. Numerical examples and application studies using the energy consumption data of the US and China are presented.

Suggested Citation

  • Xu, X.Y. & Ang, B.W., 2014. "Multilevel index decomposition analysis: Approaches and application," Energy Economics, Elsevier, vol. 44(C), pages 375-382.
    • Handle: RePEc:eee:eneeco:v:44:y:2014:i:c:p:375-382
    DOI: 10.1016/j.eneco.2014.05.002
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    More about this item

    Keywords

    Index decomposition analysis; Multilevel decomposition analysis; Multi-hierarchical model; Energy intensity; Structure change;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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