A Logarithmic Technique for Decomposing Change

Abstract

Building upon informal practices, this paper describes a logarithmic technique for decomposing change in a quantity which is assumed to be the product of several factors. Using logs, one can decompose change expressed as a ratio and allocate the change to changes in the factors. The technique is appropriate for examining change in a quantity which is assumed to be the product of several factors; in such situations this technique is much easier to use and produces simpler results than the usual decomposition of differences (Kitagawa, 1955). The technique is applied to data originally examined using the usual decomposition of a difference.