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The sign reversal problem in structural decomposition analysis

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  • Nagashima, Fumiya

Abstract

A structural decomposition analysis (SDA) based on the input-output model disaggregates fluctuations in the total factor budget into shifts in its determinants. The essence of SDA is its ability to quantify the critical factors that contribute to changes in phenomena. However, it is well-known that various uncertainties are manifest in input-output datasets and SDA results may be vulnerable to substantive biases including erroneous sign reversals. This study employs Monte Carlo simulations and investigates this sign reversal problem. The simulations reveal instability in the decomposition results, particularly the effects of the intensity term and the economic structure term. In contrast, the decomposition effect of the final demand term is relatively insusceptible in this regard.

Suggested Citation

  • Nagashima, Fumiya, 2018. "The sign reversal problem in structural decomposition analysis," Energy Economics, Elsevier, vol. 72(C), pages 307-312.
    • Handle: RePEc:eee:eneeco:v:72:y:2018:i:c:p:307-312
    DOI: 10.1016/j.eneco.2018.04.027
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    More about this item

    Keywords

    Structural decomposition analysis; Uncertainty; Input-output analysis; Monte Carlo analysis; Carbon footprint;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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