This survey covers recent solutions to aggregation problems in three application areas, consumer demand analysis, consumption growth and wealth, and labor participation and wages. Each area involves treatment of heterogeneity and nonlinearity at the individual level. Three types of heterogeneity are highlighted: heterogeneity in individual tastes, heterogeneity in income and wealth risks and heterogeneity in market participation. Work in each area is illustrated using results from empirical data. The overall aim is to show how concerns faced by empirical researchers regarding aggregation can be addressed.
Authors
Richard Blundell
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Thomas M. Stoker
Tom is a Gordon Y Billard Professor of Economics at MIT and an International Fellow of IFS. He is a leading researcher in a new field of theory called semi-parametric econometrics, which combines traditional economic models with flexible statistical techniques and has recently applied these methods to studying worldwide carbon monoxide emissions, household gasoline demand, British unemployment, and productivity in U.S. coal mining.
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