I. Introduction, 117. — II. The simple model (continuous time), 117. — III. The discrete production model and the Golden Rule, 119. — IV. Discounting and the optimal stocks of capital, 121.

THE CLASSIC PAPER by Grunfeld and Griliches [3] contains many instructive insights into question of circumstances under which an aggregate dependent variable may be forecasted more precisely with a model based on aggregate variables as opposed to an aggregate of forecasts from individual equations. The statistical model they employ is standard regression framework, a single at macro level and a set of seemingly unrelated regressions (to use Zellner's term) at level. Under assumptions of perfect model specification and nonstochastic regressors, a result of Theil's supports superiority of equations. It is Grunfeld and Griliches' main contention, however, that equations are likely to be more poorly specified than is macro equation. Perhaps, therefore, an aggregation will be realized in prediction of aggregate dependent variable by use of macro equation. While intuitively appealing, one soon finds that to articulate notion that micro equations are likely to be more poorly specified than is macro equation is difficult. Grunfeld and Griliches provide an illustration [3, pp. 7-9] that more than anything else points up elusive character of this notion. Recently, Orcutt, Watts, and Edwards [7] and Edwards and Orcutt [2] published papers that ostensibly support prediction from disaggregated data. Edwards and Orcutt note that a more basic difficulty with equations is that suitable data are scarce. Grunfeld and Griliches had earlier observed in passing that the poor quality of data may be another source of aggregation gain [3, p. 10]. It is precisely this consideration which we propose to examine in present paper. More particularly, we examine virtues of estimating or macro equations when independent variables in equations are observed with error, but corresponding aggregate variables have a smaller (or possibly no) observation error. There are many economic applications in which such offsetting errors may be plausibly hypothesized. For example, there may be some arbitrariness in classification of products (or industrial breakdown), so that while total sales figures for a given firm may be well established, their components may be subject to error. Alternatively, we may have common situation in which an aggregate figure is collected on a regular basis from a relatively complete sample, but components are calculated from benchmarks provided from a smaller or an older sample.

[The paper presents maximum likelihood methods for estimating four types of disequilibrium models. In each case the model includes three equations: the demand equation, the supply equation, and the condition that quantity observed is the minimum of quantity demanded and quantity supplied. The first model consists of just these equations. In the second model one knows whether one is on the demand function or the supply function by looking at the direction of the change in price. In the third model the price change is assumed to be proportional to excess demand. In the fourth model the price change is a stochastic function of excess demand and possibly other exogenous variables. Some illustrative calculations are presented using the housing starts model considered by Fair and Jaffee in an earlier issue of this journal.]

Journal Article A Note on X-Inefficiency Get access D. A. Peel D. A. Peel University of Liverpool Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 88, Issue 4, November 1974, Pages 687–688, https://doi.org/10.2307/1881831 Published: 01 November 1974

[This paper establishes certain conditions for the validity of Nagar's approximations to the mean and second moments of econometric estimations, where the estimators are rational functions of the OLS estimator of the reduced form coefficients, and of the corresponding estimate of the equation error variance matrix. The criteria depend upon the existence, and asymptotic orders of magnitude, of the moments of the estimators.]

Phoebus J. Dhrymes, R. Berner, D. Cummins, A Comparison of Some Limited Information Estimators for Dynamic Simultaneous Equations Models with Autocorrelated Errors, Econometrica, Vol. 42, No. 2 (Mar., 1974), pp. 311-332

T HIS paper attempts to show that there is merit in the long-standing but much abused distinction between 'informative' and other types of advertising, and that this difference is revealed in a differential effect on economic performance. After a brief literature survey, section II develops a theoretical distinction between informative and goodwill advertising. Section III outlines a test of the hypothesis that the different kinds of advertising will have opposite effects on market performance. Section IV presents the results of this test. Section V summarizes and relates the results to other recent work on the economics of advertising.