Comparing and Expanding SDA and INA Techniques Applied to Physical Flows in the Economy

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1 Copng nd Epndng S nd IN Technque ppled o Phcl Flo n he Econo b Ruge Hoek nd Jeoen vn den Begh epen of Spl Econoc Fcul of Econoc nd Econoec Fee Unve e Boeleln HV ed The Nehelnd hoek@econ.vu.nl, begh@econ.vu.nl BSTRCT Sucul decopoon nl S nd nde nube nl IN e ehod h decopoe econoc elonhp no deenn ouce. The effec of echnologcl, dend nd ucul chnge on phcl flo cn heefoe be nlzed. lge nube of envonenl poble e eled o el flo geneed b econo. The f of he ppe o cope he S nd IN ehod. The fundenl dffeence h S bed on npuoupu d hle IN ue onl he ggege eco d. S nd IN hve developed fl uonooul nd dffeen pplcon pcce e ued. IN, fo eple, h developed oe ophced e of decopoon ndce. The econd of h ppe o nfe hee IN ngh o he S eng. The ehod e ubequenl evlued ung nuecl eple. The uho ould lke o hnk Ek ezenbche nd Mcel Boun fo he coen on ele veon of he ppe.

2 BSTRCT.... INTROUCTION S N IN COMPRE...4 FUNMENT IFFERENCES...4 IFFERENCES IN THE PPICTIONS OVERVIEW OF IN INICES...6 INICTOR N ECOMPOSITION TYPES...6 ECOMPOSITION INICES ERIVTION OF S INICES...7 MUTIPICTIVE ECOMPOSITION OF N INTENSITY INICTOR...8 Pec Mehod...9 Non-Pec Mehod...9 Pec Mehod Pec Mehod nd 2 Cobned...0 ITIVE ECOMPOSITION OF N BSOUTE INICTOR... Pec Mehod...2 Non-Pec Mehod...2 Pec Mehod Pec Mehod nd 2 Cobned...3 ITIVE ECOMPOSITION OF N ESTICITY INICTOR...3 pee, Mhll-Edgeoh nd Pche NUMERIC EXMPE PPROCH SEECTION CONCUSIONS...9 PPENIX. VRIBES...20 PPENIX 2. IN ECOMPOSITION FORMUS...2 REFERENCES

3 . INTROUCTION To nlze nd undend hocl chnge n econoc o envonenl ndco ueful o e he dvng foce o deenn h undele hee chnge. To echnque fo decopong vble chnge no he deenn effec e ucul decopoon nl S nd nde nube nl IN ehod. 2 Boh ehod llo eeche o e he nfluence of econoc goh, ecol hf nd echncl chnge on he ndco chnge. S h been ued o ud ue uch eneg conupon, envonenl eon, econoc oupu, vlue dded, nd eploen. IN h been ppled nl o eneg nd eneg eled eon. The ehod dffe h egd o he odel nd d ued nd heefoe lo led o dffeen deenn beng dnguhed. S bed on he npu-oupu odel of he econo, hch nclude d on he neeco delvee. IN, on he ohe hnd, onl ue ggege eco nfoon. p fo h fundenl dffeence oe pplcon dncon lo e. The IN leue hve ued de nge of ndco pe nd decopoon ndce. The of h ppe e ofold: To gve n oveve of he dffeence nd le n he 2 e of decopoon nd o noduce he hecl ncce of he IN ndce o he S cone. hpohecl nuecl eple e up o fuhe ene dffeence beeen he vou IN nd S ehod. The eple n eenon of ng 999. The o ehod ll focu on phcl flo dven b eco nd he econo hole. Phcl flo cch-ll phe o cpue ll he el npu uch eneg, el, plc o oupu uch CO 2 eon, cdfng eon. Mn phcl flo hve dec elon o envonenl poble. The decopoon echnque dcued n h ppe e, hoeve, no ecluve o phcl flo nl. The decopoed equon ue n nen veco of he el nen pe eco,.e. el houghpu pe un oupu. Sl veco could be ued fo nle uch lbo uppl o vlue dded developen. The ucue of he ppe follo. Secon 2 gve genel copon of he S nd IN feld. Secon 3 dcue decopoon ndco, ehod nd ndce h e ued n he IN leue. In econ 4 hee IN decopoon echnque e nled o he S eng. Secon 5 devoed o he nl of nuecl eple n hch ll he decopoon ehod e clculed. In econ 6 he chcec of he ndce e dcued o fcle nde choce. Secon 6 conclude. 2 Th ppe ue he e doped b Roe nd Cle 996. S oee lo efeed o npu-oupu ucul decopoon nl hle IN oee pl clled decopoon nl o eneg decopoon nl. 3

4 2. S N IN COMPRE Fundenl ffeence In he eve of S, Roe nd Cle 996 befl cope S nd IN ehod. I noed h f npu-oupu nfoon dded o IN gh cull genelze o IO S. copehenve copon of he o ehod hoeve lckng n he leue. The p dffeence he econoc d nd odel h e ued ee ble fo he d nd ppend fo he vble eplnon. S ue npu-oupu d n he fo of echncl coeffcen Z / nd he fnl dend pe eco Mlle nd Bl, 985. IN on he ohe hnd ue he oupu pe eco fo he econoc decopoon. The el nen /, eue of he eco el ue pe un oupu, ued deenn n boh ehod he k o he phcl flo. Tble. ued n IN nd S Mone ccoun Phcl ccoun Seco Seco 2 Fnl end Oupu Mel Ue Seco Z Z Seco 2 Z Z n dvnge of he IN ehod heefoe he loe d equeen. Hoeve, he e d ued n S gve oe deled decopoon of he econoc ucue hn IN. The npu-oupu odel lo nclude ndec dend effec of dec dend. ec dend fo he poduc of good fo one eco lo led o ncee n dend fo ohe eco becue he uppl npu o h eco. Th knon ndec dend. The IN odel doe no ue he npu-oupu odel nd heefoe onl cpble of eng he pc of he dec effec. econd dvnge of he npu-oupu odel h he colun of he echncl coeffcen be egded poducon funcon. Th decpon of he echnolog of he econo ke decopoon of ubuon nd effcenc effec poble. Such effec cn no be dnguhed n he IN feok. ffeence n he pplcon Soe of he dffeence of S nd IN cnno be cbed o he fundenl dffeence enoned bove. One of hee dffeence he nge of polc ue h hve been nlzed. IN h lo ecluvel been ued fo he nl of eneg ue nd eneg eled eon. S h been ppled o de nge of ue ncludng eneg ue, CO 2 -eon, lbo equeen, vlue dded nd econoc oupu. nohe con he hoe e-ep n IN pplcon nnul decopoon e coon. S pplcon uull ue 5-0 e eep. The eon fo h dffeence pobbl h npu-oupu d h n coune do no poduce npu-oupu ble on n nnul b. The lge dffeence n he pplcon h IN h developed gee degee of ehodologcl ophcon. The decopoon ude hve developed gee oun of ndco pe nd decopoon ndce hn he S leue. 4

5 Fgue 2 depc he dffeen decopoon ppoche h hve been ppled n he IN leue. I nl bed on he u ppe b ng 999. INTENSITY BSOUTE ESTICITY Mulplcve ddve ddve Mehod W Mehod 2 Mehod W Mehod 2 M-E C R P M-E C R P M-E C - Convenonl v R - Refned v - pee P- Pche M-E - Mhll-Edgeoh W - dpve Weghng v INICTOR TYPE - Bold Cpl ecopoon Tpe - Bold ecopoon Mehod - Bold Ilc ecopoon Indce - Nol Fon Fgue. ecopoon ehod ppled n he IN leue Fgue ho h hee e 3 ndco pe 3 bolue, nen nd elc h hve been decopoed. The eneg conupon o el ue ould be n eple of bolue ndco, hle he nen eue ecod he oun of el ued pe un oupu o vlue dded. The hd ndco he oupu elc of eneg h eue he elve chnge of n eneg ue coped o he one oupu. The S leue lo ecluvel focued on he bolue ndco pe he onl ecepon knon o he uho ezenbche, Hoen nd o The nen nd bolue ndco be decopoed b he ulplcve nd ddve decopoon pe. Thee ee o be no eon o pefe ehe of hee ehod nd he IN leue ue boh pe. S pplcon genell ue he ddve decopoon ecepon beng ezenbche, Hoen nd o 2000, Hn nd khnn 994. The IN leue h elded 2 decopoon ehod h be ppled o ehe he ulplcve o ddve decopoon. Th dncon bed on he goh e ehod o dffeence ehod 2 decopoon of he deenn. 4 Pec fo of hee ehod ee noduced n u, ng nd Ong 992 Fnll hee e nube of decopoon ndce: convenonl v nd efned v ehod ; pee, Pche nd Mhll-Edgeoh ehod 2; nd he dpve eghng v nde cobnon of ehod nd 2. Fgue ho 26 poble decopoon eul h cn be obned fo he e de. eeche f need o decde hch ndco he ould lke o nvege. Theefe n nde hould be choen b elecng he decopoon pe, ehod nd nde. 3 In ng 999 ue he e eneg nen ppoch, eneg conupon ppoch nd eneg elc ppoch. Snce he of he ppe o gve n oveve of S nd IN n de cone, hee eneg eled ne hve been eplced b oe genel e. 4 The e ehod nd 2 e bed on u, ng nd Ong 992 hch popoed he pec v nde ehod nd 2. Snce hee e ould no enble clfcon of he efned v nde, he clfcon h been bodened b ecludng pec v. 5

6 In he S leue he ndce h e ued e oe led. ecopoon of nen ndco e nd ulplcve decopoon e lo el done. The ndd S pplcon ue he ddve decopoon of n bolue ndco. pee nd Mhl-Edgeoh ndce e ued hle he v ndce hve no, f e kno, been ued. The S leue h, hoeve, elded one ppoch h no ued n IN pplcon. ezenbche nd o 998 noe h vble h n deenn cn be decopoed n n!, ung h he decopoon h no edul nd h ech deenn cn ehe ue be o enl e egh. In ohe od he gnude of he effec of deenn d could be clculed b d d 2 d 3 - d 4 - d 5 o d d 2 - d 3 d 4 - d 5 o n ohe cobnon of he deenn nd egh. ou cn ee he upon of conen egh fo ll deenn n IN dcded. The vege of ll he poble cobnon hen ken he cul deenn effec. 3. OVERVIEW OF IN INICES Indco nd ecopoon Tpe The ndco pe bolue, nen nd elc cobned h he decopoon pe ulplcve o ddve decopoon eul n 5 cobnon. 5 To llue he dffeen ndco nd decopoon pe ue funconl elonhp, d c hee n bolue ndco of el ue b n econo nd d,,d c e deenn. Sll he el nen / hee he oupu be dependen on deenn g,,g c n he funcon fg,,g c. The follong equon llue he 5 cobnon. Tble 2. ecopoon ndco nd pe Indco Tpe Equon Inen Mulplcve effec g effec g 2... effec g c effec g effec g... effec g 2 Inen ddve 2 c bolue ddve effec d effec d... effec d bolue Mulplcve 3 2 d c effec d effec d... effec Elc ddve effec d effec d effec 2 d c 2... Thee 3 ndco pe nd 2 decopoon ehod e he ng pon fo he decopoon. h been noed he IN leue ue ll 5 of hee c Reebe h elc onl decopoed ddvel n he IN leue. 6

7 cobnon. S focue lo ecluvel on he bolue-ddve decopoon. ecopoon Indce Fgue dpled he de ve of ndce h hve been ppled n IN. Inde heo h long ho h nl focued on he developen of pce nd qun ndce n econoc. Fhe 922 n The Mkng of Inde Nube, povded he o nfluenl conbuon o he developen of nde nube heo b copng nd dcung hunded of dffeen ndce. epe Fhe nl cl o n del nde 6, he nde nube leue h concluded h hee no ngle nde h fe ll benefcl popee. Vog 978 noduced he de h ech nde decbe ph beeen o dcee e pon. The nde heefoe c n ppoon of he cul connul e ph. Thee e n nfne nube of negl ph nd heefoe n nfne nge of poble ndce. One ehod fo elecng nde nube bed on he oc ppoch. Th ppoch nle he popee of he ndce b eng he popee fo n oveve ee Vog nd B, 997. The coenubl e, fo eple, fnd hehe he nde nvn o he un ued. Clel f he eul chnge pl becue ou conve ou d fo klog o onne he nde of no ue. nohe e he e evel e hch check f n nde fo hch he e 0 nd e eveed, gve he ecpocl vlue. Soe of he ndce h e ofen ued n S nd IN, uch he pee nd Pche, fl h e ERIVTION OF S INICES In h econ, ndce fo he ulplcve decopoon of nen nd he ddve decopoon of bolue nd elc ndco e deved fo he S eng. The nen ddve nd bolue ulplcve e no deved becue he devon ve l. The equvlen IN equon cn be found n ppend 2 nd he bol ued e gven n ppend. The follong ndce e deved: Mulplcve decopoon of n nen ndco. Mehod Convenonl v, Refned v 8 2. Mehod 2 pee, Mhll-Edgeoh, Pche 3. Mehod nd 2 cobned dpve Weghng v nde ddve decopoon of n bolue ndco 4. Pec v Inde Mehod Convenonl v, Refned v 6 Fhe o convnced h h nde pefec h hen he found h h nde dd no f he o-clled ccul e, he concluded h he e hch fled ee Vog nd B Fo eple f qun chnge fo 80 o 00 he pee nde ndce h h 25% ncee, hle f he vble chnge fo 00 o 80 gve 20% decee. The pee nde heefoe fl he e evel e. 8 Th pecl ce of ehod n hch he equon lo epeed n goh e bu ned of he hec en hch ued fo he Convenonl v nde he loghc en beeen o e peod ued. 7

8 5. Pec v Inde Mehod 2 pee, Mhll-Edgeoh, Pche 6. Mehod nd 2 cobned dpve Weghng v nde ddve decopoon of n elc ndco 7. pee, Mhll-Edgeoh, Pche Mulplcve decopoon of n nen ndco In he follong econ he devon of he ulplcve decopoon of he el nen gven. In n econo h n eco he el nen of he econo gven b he follong equon: 6 Whee nd nge fo eco o n. The vble h do no hve ubcp e econo-de vlue. The nonl el nen heefoe equl o he o of he ol el ue nd he ol oupu of he coun n queon. The poduc of he eonef nvee nd he fnl dend he npu-oupu odel pecfcon fo eco level oupu. ffeenng h epec o e nd dvdng boh de b he leve: d d d d ˆ 7 d d d d Whee elve goh e e ndced b h, e.g. d ˆ. d The equon could hoeve lo be een enel n elve goh e: ˆ ˆ ˆ ˆ ˆ 8 Whee / egh funcon nd he el houghpu geneed n eco due o he fnl dend of eco. Equon 7 nd 8 cn boh be ued b fo he decopoon. If equon 7 doped efeed o ehod 2 decopoon becue he deenn e epeed n e of dffeence, hle equon 8 ehod epee he deenn chnge n e of goh e. Upon negon of he lef nd gh hnd de ove dcee peod - o, boh ehod eul n he e genel decopoon fo: lf n d I I I I I I 9 The vble e he decopoon effec fo hch he upecp ndce he deenn. 9 The ubcp ll be ued o ndce he ndco nd pe of 9 lf - echnolog eonef effec, fnl dend effec, n el nen effec nd he poducon effec. The d upecp nd fo he edul effec. 8

9 decopoon h ued. In h ce he ulplcve decopoon of nen I. The ol chnge n he ndco no upecp gven on he lef hnd de of he equon. ll decopoon ubcp nd upecp be found n ppend. The bove decopoon eul n 4 deenn effec nd edul. Fuhe decopoon of he n*n eleen of he eonef 0 nd he n eleen of he fnl dend nd el nen veco hoeve poble. Pec Mehod B negng boh de of equon 8 he follong u, ng nd Ong 992 found he follong pec pecfcon. lf I ep I ep n I ep I ep - lf [ ] - [ ] - n [ ] 0 pecl ce of he pec v nde ehod he convenonl v nde hee lf n 0.5. Non-Pec Mehod The efned v nde non-pec ce of ehod hee ned of he hec en n he convenonl v nde he nolzed loghc en ken of he egh. I lo clfed unde ehod becue epee he deenn n goh e b fo decopoon 2. 0 One could look oe pecfc echnolog effec b goupng echncl coeffcen ee Roe nd Cle 996 fo del. lhough hecl del e no gven n u, ng nd Ong 992 ued h he pec pecfcon bed on he negl fo of he en vlue heoe. ung nd e connuou on [-,] nd > 0 on -,. Then hee oe pon c beeen - nd uch h τ τ dτ c τ dτ The pon c lo be en n he follong pec fo: - c lf 2 lhough neve ppled n he IN leue, he efned ehodolog could, ee, be ppled o ehod 2. 9

10 ep lf I R ep I R ep n I R ep I R Pec Mehod 2 The dffeence beeen ehod nd ehod 2 he pecfcon no goh o dffeence e epecvel. Mehod 2 decopoon bed on negon of boh de of equon 7. lf I 2 ep I 2 ep lf n n I 2 ep I 2 ep 2 Thee pecl ce of pec v ehod 2 e pee lf n 0, Pche lf n nd Mhll-Edgeoh lf n 0.5. Pec Mehod nd 2 Cobned The dpve eghng v nde povde of fndng he -e n nonb b ung h he decopoon eul e he e fo ehod nd 2. The upon of he dpve eghng v nde e follo: lf lf I 2 I I 2 n n I I 2 I I 2 lf ehod ehod n ehod lf n ehod 2 ehod 2 ehod 2 3 0

11 The equon equl led o he follong unque vlue fo he pee. lf n 4 Thee vlue cn be ued n npu o he ehod o 2 decopoon equon o obn he oced decopoon eul. ddve decopoon of n bolue ndco In h econ n bolue ndco of el ue ll be decopoed b en of ddve decopoon. To vod epeon he devon ll be le deled hn hoe of he pevou econ. The be equon of el ue n S : 5 ffeenng h epec o e gve: d d d d d d d d 6 Whch cn lo be een n e of elve goh e: d d ˆ ˆ ˆ 7

12 Inegng boh de of equon 7 led o ehod decopoon hle equon 6 eld ehod 2 pecfcon. Inegng boh de of hee o equon ove he dcee e peod - nd led o he genel decopoon fo: lf n d 8 Pec Mehod lf lf [ ] n n [ ] [ ] 9 Noe h coped o he ulplcve decopoon of el nen, hee no poducon effec n h ce. The convenonl v nde gven b eng he -vlue o 0.5. Non-Pec Mehod The follong e he equon fo he efned v nde decopoon. lf R R n R 20 Pec Mehod 2 lf 2 2 n lf [ ] [ ] n [ ] 2 2 2

13 3 The pee, Mhll-Edgeoh nd Pche nd e poduced f he -pee e e o 0, 0.5 nd epecvel. Pec Mehod nd 2 Cobned The dpve eghng v nde eul fo he e upon equon 3 he nen ce ecep fo hoe h e pecfcll focued on he poducon effec. lf n 22 ddve decopoon of n elc ndco The oupu elc 3 of el ue cn be found b eplcng he eul of he ddve decopoon of el ue no he equon fo he oupu elc: d lf E n 23 pee, Mhll-Edgeoh nd Pche In ng nd ee 996 he pee nd Mhll-Edgeoh veon of h decopoon e gven. lf lf lf lf lf E ng nd ee 996 lo efe o he eneg coeffcen n he ud of eneg ue.

14 E n E 2 n 2 n n n To obn pee nd Mhll-Edgeoh ndce he -pee e e o 0 nd 0.5 epecvel. Pche, lhough no pleened n ng nd ee 996 could be obned b eng he -pee o. The equon ho h he decopoon eul h coe fo he ddve decopoon of el ue e lo dependen on he pee vlue. I.e. If ou e clculng he pee eghed deenn effec on elc hen he ddve pee decopoon eul hould be ued npu. 5. NUMERIC EXMPE In h econ hpohecl nuecl eple ued n ng 999 epnded o ud he dffeence n S nd IN Tble 2. The bold nfoon fo ng 999 hle he npu-oupu nfoon nol fon h been dded fo he S decopoon. ll nfoon n one un, ecep fo he el ue n bcke hch n phcl un. The eul of ll he decopoon ppoche e gven n ble 4. Tble 3. Eple n e - nd e Ye - Seco Seco 2 Ye Seco Seco 2 Seco Seco Seco Seco W 2 8 W 2 28 Tol 0 40 Tol

15 Tble 4. Reul fo he S nd IN decopoon ppoch MUTIPICTIVE ECOMPOSITION OF N INTENSITY INICTOR eenn effec Mehod/Inde S/IN Tol Poducon Sucue eonef Fnl Inen Redul end Mehod Convenonl v IN S Refned v IN S Mehod 2 pee IN S Mhll-Edgeoh IN S Pche IN S Mehod & 2 cobned dpve Weghng IN v Inde S ITIVE ECOMPOSITION OF N BSOUTE INICTOR eenn effec Mehod/Inde S/IN Tol Poducon Sucue eonef Fnl Inen Redul end Mehod Convenonl v IN S Refned v IN S Mehod 2 pee IN S Mhll-Edgeoh IN S Pche IN S Mehod & 2 cobned dpve Weghng IN v Inde S ITIVE ECOMPOSITION OF N BSOUTE INICTOR eenn effec Mehod/Inde S/IN Tol Poducon Sucue eonef Fnl end Inen Redul pee IN S Mhll-Edgeoh IN S Pche IN S

16 In he ulplcve decopoon of el nen IN led o 2 epe deenn effec hle S dnguhe 4 effec. In he ddve decopoon of el ue nd elc boh ehod dnguh 3 effec. Thee e he op e effec bu ech of hee, ecep he poducon effec, e copoed of ub-effec. The eonef n 2 ub-effec 4 nd he ucue, fnl dend nd nen effec ll n effec cn heefoe be fuhe decopoed. The ulplcve decopoon of IN heefoe h 2n ub-effec oppoed o n 2 2n n S. In he ddve decopoon of el ue nd elc he dffeence 2n veu n 2 2n. I no upng h S dnguhe oe ub-effec nce lo ue oe d. Th ppe h huf no dcued he nepeon of he deenn effec. The poducon effec eue he effec of he chnge n he ovell oupu level of he econo on he ndco n queon. ble 4 ho f ol oupu go h dnhng effec on he nen ndco becue ken up n he denono of h S effec. In he ce of n ddve IN decopoon of bolue ndco, ng oupu obvoul h pove effec on he ol el ue. The ucue effec ndce he effec of hf n he elve he of oupu on he ndco. The eonef effec ndce he effec of he chnge n he eonef coeffcen. Snce h cull deved fo he echncl coeffcen cull eue of he chnge n echnolog of he econo. nohe echnologcl effec he nen effec hch ee he effec of chnge n he el nen vlue n ech eco. l, he fnl dend effec ee he chnge n he ndco h cn be cbed o he hf n he fnl dend fo poduc fo ech eco. Tble 4 ho h ech of he decopoon ndce poduce dffeen eul. n pon coponen of ech ppoch he edul effec. The ble ho h pee nd Pche genell hve ubnl edul h e lge coponen of he ol decopoon. The Mhll-Edgeoh, convenonl v, nd dpve eghng v ndce hve loe edul effec. The efned v nde, hoeve, h no edul. The nge of eul fo ech deenn effec cn be que lge. Invbl he pee nd Pche ndce povde he o eee of he nge h he ohe ndce oehee cloe o he cene of h nge. 6. PPROCH SEECTION IN o S? Th ppe h hon h eech no hocl d cn povde vluble nfoon bou he ponce of pecfc deenn. The queon of he pefeed ehod h hoeve no been ddeed. S h he n dvnge of ncludng ndec effec of dend chnge nd heefoe gvng feel fo he necon h e n n econo. The ndec effec e ofen ubnl nd n envonenl nle hee effec be ve pon. lhough eco be ve eneg-eenve could eque lo of npu h equed lge oun of eneg. In he npu-oupu odel h ndec eneg ncluded n he nl. The dbck of he eonef odel upon of conn echncl coeffcen. No cle effec o ubuon 4 Reebe h n he nube of eco 6

17 heefoe peen n he ndd npu-oupu odel. Nevehele he npu-oupu odel del ued nd he ncluon of he ndec effec o dvnge of S ove IN. Ovell S decopoon povde oe deled nfoon bou he effec of he deenn. Clel h eled o he fc h oe d ued n he npu-oupu eup. The decopoon of el nen eld 4 effec hle he IN dnguhe 2 effec. If hee effec e fuhe decopoed no he coponen p hen IN 2n h f fee ub-effec hn S n 2 2n. In he bolue decopoon he dffeence n he nube of ub-effec 2n veu n 2 2n. 5 The echncl coeffcen epeened n he eonef nvee h n 2 eleen n fc hold nfoon bou he echnologcl npu equeen of ll eco. S heefoe h he oppoun fo fuhe decopoon of h echnolog effec. I be concluded h f npu-oupu d vlble hen S hould be pefeed ove IN. I povde oe del bou he econoc chnge ffec el ue, nen o elc. In ce hee he d vlbl lo nd ho e-ep nl of nee, IN oe lkel o be feble. Hoeve hould be noed h ho e ep do hve ddvnge hehe fo S o IN n h he chnge h e found be ho-e effec h do no necel pl n eveble hf n he econoc ucue. ong-e decopoon heefoe gve oe ccue depcon of he deenn chnge. Inen, bolue o Elc? Clel he choce of decopoon ndco depend on he ue unde nvegon. Chnge n he oupu elc ll be of nee o people ho e eechng ho el ue ec o oupu ncee. ng nd ee 996 lo noduced ehod of ung he elc ndco o poec eneg ue od he fuue. The bolue ndco be hen pon o nvege he cul qun of el ue. The nen ndco look he ue of el elve o he oupu nd heefoe bee ued o queon of el poducv. ng 999 gue h he choce beeen bolue nd nen eue e of ee of peenon nd nepeon. Inen ndco e oe el gphed becue he e ofen ndce h e cloe o one. bolue decopoon e hoeve ee o nepe b non-pecl. n dded elecon ce n he IN ce h f he e peod long o he oupu goh h been lge, he poducon effec done n he bolue ndco decopoon. If he eeche neeed n nvegon of ucul chnge, he nen ppoch heefoe pefeed. Mulplcve o ddve? Thee ee o be no eon o pefe ehe of hee decopoon pe ecep fo pehp he ee of peenon nd nepeon guen. 5 IN nd S boh hve he e el nen effec. I onl n he econoc poon of he decopoon h he dffe. 7

18 Mehod o Mehod 2? gn hee ve lle eon o pefe epeng he deenn n e of elve goh e ehod o dffeence e ehod 2. Pehp no guen h he ehod foul e ee o peen becue he ll hve equl egh. Whch Inde? The lge ue h h no been ddeed n h ppe he ue of nde elecon. ll ndce hve cen popee nd hould heefoe be choen ccodng o he dend e. Tble 5 uze he popee of he ndce dcued n h ppe h u of popee lgel bed on ng 999. Tble 5. Popee of he ndce n h ppe Pec Redul Zeo vlue poble pee e lge no Mhll-Edgeoh e odee no Pche e lge no Convenonl v e odee e Refned v no none no ee eplnon dpve Weghng v no odee e The f ue hehe he nde pecl ce of pec fo. econ 4 hoed, he pee, Mhll-Edgeoh nd Pche ndce e pecl ce of pec v ehod 2. The convenonl v nde pecl ce of pec v ehod. Th en h he uho h o chooe he pee vlue. The non-pec ndce do no eque n e pee upon nd he eul heefoe puel d dven. Th doe no, hoeve, ke he nonpec heoecll upeo nce he upon h hve o be de bou he nde o h led o unque vlue e u b choong pee vlue. The vlue of he edul ve pon becue hen ou e neeed n he ponce of deenn effec hen lge edul defe he pupoe. pee nd Pche coe o on h ceon. Mhll-Edgeoh, convenonl v nd he dpve eghng v nde coe bee bu ng 999 noe h f chnge n he d e dc he edul deeoe. The efned v nde led o pefec decopoon of he ndco chnge. The hd ceon n ble 5 he ue of zeo vlue n he d e. Th pcull pon ue fo S becue deled npu-oupu d nel l hve zeo vlue n he ble becue n eco do no hve neecol delvee. Cen el pe lo no be ued n he be o enl e ledng o zeo vlue n he decopoon. The decopoon ehod bed on ehod 2 ppoche e bed on dffeence e nd heefoe hve no poble. The convenonl efned v do hoeve hve poble f he enl e zeo nul logh of zeo nu nfn o he be e dvon b zeo gve plu nfn. I coon pcce o eplce he zeo vlue b ll vlue δ o olve h poble. ng nd Cho 997 ho h he efned v nde ho convegng decopoon eul δ ppoche zeo bu h h no he ce fo he convenonl v nde. 8

19 ng 999 dd oe obevon bou he nepebl of oe of he ndce. The pee nde deeed o be e o undend becue eghng b he be e ofen done. Weghng ung pee vlue of 0.5 h he dvnge of eng e ecll. The Pche nde boh decopoon nd foecng cn be done h efeence o he e e. Ovell cn be d h he pee nd Mhll-Edgeoh ndce h e coonplce n S do no eue up ell gn oe of he ndce h coe fo he IN leue. Pcull he efned v nde h oe ve ppeg popee. In pcul he onl nde h doe no genee edul. 7. CONCUSIONS nube of concluon be dn fo h ppe.. S nd IN e cloel eled decopoon ehod. Fundenll he onl dffeence he ue of npu-oupu d n S. 2. The ophced decopoon ehod developed n he IN leue e nfeble o he S feok econ Mn of he ndce n ue n IN hve upeo popee ove he pee nd Mhll-Edgeoh ndce h e coon n S. 4. IN nd S eeche hould be oe e of he leue n boh feld o full benef fo he ehodologcl dvnce n decopoon echnque. Fuhe eech ould nclude copng he nde e developed n ezenbche nd o 998 nd pplng o IN. The eul fo he ddve decopoon of nen nd he ulplcve decopoon of bolue ndco hould lo be dcued. 9

20 PPENIX. VRIBES The upecp l defne he e hch he vble ken. Coun-level Tol el ue on Tol oupu > Mel nen of he econo on/> / n Nube of eco n he econo Seco-level Z The neecol delvee of good o evce of eco o eco > Techncl coeffcen. The oun of npu fo eco equed pe un oupu of eco. eonef nvee.the dec nd ndec effec on he oupu of eco pe un chnge of fnl dend of eco I. Mel ue b eco due o dend fo poduc fo eco onne. Mel ue b eco onne. Mel ue egh. Mel ue n eco due o dend fo poduc fo eco popoon of he ol el ue onne /. Mel ue egh. Mel ue n eco popoon of he ol el ue onne /. Oupu of eco > Fnl dend of eco > Mel nen of eco on/> / Oupu he. Seco oupu popoon of ol oupu / Subcp nd Supecp of pee Supecp: Sucul effec n Inen effec poducon effec lf eonef effec fnl dend effec Subcp nd Supecp of decopoon vble If doe no hve upecp equl o he ol chnge of he ndco Supecp: Sucul effec n Inen effec poducon effec lf eonef effec fnl dend effec d edul effec 20

21 2 Subcp Indco pe I Inen bolue E Elc 2 nd Subcp ecopoon pe ddve Mulplcve 3 d Subcp ecopoon nde Pec v Inde Mehod R Refned v Inde Non-Pec Mehod 2 Pec v Inde Mehod 2 dpve Weghng v Inde PPENIX 2. IN ECOMPOSITION FORMUS Th ppend peen he pec pecfcon of he dffeen decopoon fo n IN ee lo ng 999. Mulplcve decopoon of n nen ndco Pec Mehod [ ] I - ep [ ] I n - n ep Non-Pec Mehod R I ep R I n ep Pec Mehod 2 I 2 ep I n n 2 ep Pec Mehod nd 2 Cobned

22 22 n ddve decopoon of n bolue ndco Pec Mehod [ ] [ ] n n [ ] Non-Pec Mehod R R n R Pec Mehod 2 [ ] 2 [ ] n n 2 [ ] 2 Pec Mehod nd 2 Cobned

23 23 n ddve decopoon of n elc ndco E 2 E n n n n 2 n E 2 If he -vlue e e o 0, 0.5 nd, he pee, Mhll-Edgeoh nd Pche ndce e poduced epecvel.

24 REFERENCES -ng, B.W., 999. ecopoon Mehodolog n Eneg end nd Envonenl nl. In: Hndbook of Envonenl nd Reouce Econoc. ed. J.C.J.M vn den Begh. Edd Elg, Chelenh. -ng, B.W. nd K.H. Cho, 997. ecopoon of ggege Eneg nd G Eon Inene fo Indu: Refned v nde Mehod. The Eneg Jounl 83 pp ng, B.W. nd P.W. ee, 996. ecopoon of Indul Eneg Conupon: The Eneg Coeffcen ppoch. Eneg Econoc 8 pp ezenbche, E.,. Hoen nd B. o, bo Poducv n Ween Euope : n Inecoun, Inendu nl. Jounl of Regonl Scence fohcong pp. -ezenbche, E. nd B. o, 998. Sucul ecopoon Technque: Sene nd Senv. Econoc Se Reech 04 pp Fhe, I., 922. The Mkng of Inde Nube: Sud of he Vee. Te nd Relbl. uguu M. Kell, Ne Yok. -Hn, X. nd T.K. khnn, 994. Sucul Chnge nd Eneg Conupon n he Jpnee Econo : n Inpu-Oupu nl. The Eneg Jounl 53 pp u, X.Q., B.W. ng nd H.. Ong, 992. The pplcon of he v Inde o he ecopoon of Chnge n Indul Eneg Conupon. The Eneg Jounl 34 pp Mlle, R.E. nd P.. Bl, 985. Inpu-Oupu nl: Foundon nd Eenon. Pence-Hll, Engleood-Clff, Ne Jee. -Roe,. nd S. Cle, 996. Inpu-Oupu Sucul ecopoon nl: Ccl ppl. Econoc Se Reech 8 pp Vog,., 978. v Indce on ffeen Ph. In: Theo nd pplcon of econoc ndce. ed. W. Echhon, R. Henn, O.Opz nd R.W. Shepd. Phc- Velg, Wuzbug. -Vog,. nd J. B, 997. The Mkng of Te of Inde Nube: Mhecl Mehod of ecpve Sc. Spnge-Velg, Hedelbeg. 24