The availability of household-level data covering long periods of time makes it relatively easy to assess likely sources of aggregation bias. In this paper, we illustrate a promising methodology, which requires computing aggregation factors across households. If these factors are stable over time, aggregate data can be used to estimate micro-parameters.
Our application covers consumer demand equations, and dynamic consumption relations, but the methodology could be applied in a variety of different contexts.
Authors
Richard Blundell
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Costas Meghir
Costas is a Research Fellow of the IFS and a Professor of Economics at Yale University and a Visiting Professor at University College London.
Guglielmo Weber
Guglielmo is a Research Associate at the IFS and Professor in the Department of Economics at the Faculty of Statistics, Padua University.
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