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Multiplicative Decomposition And Index Number Theory: An Empirical Application Of The Sato-Vartia Decomposition

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  • Paul De Boer

Abstract

In de Boer (2008), additive decompositions of aggregate changes in a variable into its factors were considered. We proposed using the 'ideal' Montgomery decomposition, developed in index number theory as an alternative to the commonly used methods in structural decomposition analysis, and applied it to the example analyzed by Dietzenbacher and Los (1998) (D&L). In this paper we consider multiplicative decompositions and show that the method proposed by D&L of taking the geometric mean of all elementary decompositions is 'ideal'. However, it requires the computation of an ever-increasing number of decompositions when the number of factors increases. As an alternative, we propose using the Sato-Vartia decomposition, which is also 'ideal', but requires the computation of only one decomposition. Application to the example of D&L reveals that the two methods yield results that are very close to each other.

Suggested Citation

  • Paul De Boer, 2009. "Multiplicative Decomposition And Index Number Theory: An Empirical Application Of The Sato-Vartia Decomposition," Economic Systems Research, Taylor & Francis Journals, vol. 21(2), pages 163-174.
  • Handle: RePEc:taf:ecsysr:v:21:y:2009:i:2:p:163-174 DOI: 10.1080/09535310902937638
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    References listed on IDEAS

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    1. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Springer;Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
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    Cited by:

    1. Martin Lábaj & Karol Morvay & Martin Hudcovský, 2015. "Labour Elasticity in V4 countries: Structural decomposition analysis," Department of Economic Policy Working Paper Series 009, Department of Economic Policy, Faculty of National Economy, University of Economics in Bratislava.
    2. Su, Bin & Ang, B.W., 2015. "Multiplicative decomposition of aggregate carbon intensity change using input–output analysis," Applied Energy, Elsevier, pages 13-20.
    3. repec:eee:enepol:v:107:y:2017:i:c:p:585-599 is not listed on IDEAS
    4. Daniel Dujava, 2012. "Príčiny zaostávania nových členských krajín EÚ: empirická analýza na základe Montgomeryho dekompozície
      [Causes of Lagging Behind of New Member States of EU: Empirical Analysis by Montgomery Decompo
      ," Politická ekonomie, University of Economics, Prague, vol. 2012(2), pages 222-244.
    5. Choi, Ki-Hong & Ang, B.W., 2012. "Attribution of changes in Divisia real energy intensity index — An extension to index decomposition analysis," Energy Economics, Elsevier, vol. 34(1), pages 171-176.
    6. Cazcarro, Ignacio & Duarte, Rosa & Sánchez-Chóliz, Julio, 2013. "Economic growth and the evolution of water consumption in Spain: A structural decomposition analysis," Ecological Economics, Elsevier, vol. 96(C), pages 51-61.
    7. repec:eee:ecolec:v:142:y:2017:i:c:p:163-176 is not listed on IDEAS

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