Aggregation in Economic Research: From Individual to Macro by J. van Daal

By J. van Daal

Our curiosity in difficulties of aggregation originates from approximately seven years in the past after we grew to become focused on learn within the box of utilized microeconomics. To our astonishment an unlimited majority of researchers during this quarter took it with no consideration that their, commonly completely derived, micro types may well meaningfully be faced with consistent with capita information. Nany of them didn't even become aware of - a minimum of they gave no utterance to it - that making use of macro information in micro versions increases massive difficulties. those that did point out the trouble, ordinarily belittled its significance. thankfully, there are noteworthy exceptions. puzzling over aggregation increases at the very least questions: "Why or why now not aggregate?" and "How to combination and, specifically, to what degree?" normal solutions to those questions can basically accept in uninformative wording (as many assertions in economics): one aggregates for the sake of tractability, due to the loss of (individual) info, to prevent or to minimize multicollineartiy, to avoid wasting levels of freedom; one abstains from aggregation to prevent lack of info, to prevent aggregation biases and one aggregates such and to such measure as to avoid or lessen the drawbacks pointed out above.

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Consequently, this 1 L ratio depends only on those vn for which n E S n Z. This means that is quasi-separable with respect to S n Z. Let ~ now nand n' E S U Z. L/ ~ a a depends on Vs "",vs only or vn vn ' 1 K on Vz , ... ,v z only; hence this ratio depends at most on I L those vn with n E S U Z. L /~) . 4) S n Z. One can always find such an nil because S n Z is supposed to be non-empty. 4) depends on v •••• ,v s only, sl K whereas the second member depends on Vz , ••• ,v z only. L / ~ aV av , n n E S U is independent of variables with an index outside of S U Z.

10) 1, ••• ,M and t= 1, ••• ,T. ll ) m Given P and h the parameters am of this equation can be estimated by regressing y-p/h to the variables X-Pt' m t Repeating this procedure for a sequence of values for P and h until, say, some minimum sum of squared residuals is obtained, one generates also an estimate of these two parameters. II). This will rarely be done in practice especially because the researcher usually does not compose the data Yt and xmt himself. These are given him by statistical institutes.

This F together with f, g and G completes the aggregation procedure. 6) does not hold. In that case there may be elements x and i EX such that g(x) (GO -I( Gf(x». 5). g(x) and * Gf(x). 6) has in common with other very general results in economics that as such it is not useful CHAPTER I 48 in practical situations. It is doubtful, whether in specifying the relations, we can go far beyond the results obtained so far. To clarify the link with Nataf take X C RJxM, V C RJ, W C RM and Y C R. 5). 6 Consequences for empirical work If we want to do empirical research with macro relations and we want to obey Nataf's theorem we are put in an additive world, but we also meet an additional difficulty viz.

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