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A Note of Identification and Information Loss through Aggregation

Econometrica 1976 44(4), 815
DISCUSSIONS OF IDENTIFICATION of parameters in simultaneous equation econometric models almost invariably assume that data are in the form of aggregative time series, i.e., only one measurement of each variable is available in each time period. This note shows that parameters in a model which is underidentified by the usual rank and order criteria at the aggregative level may be identified when disaggregated data aie available. The argument is presented in terms of a traditional textbook example of an underidentified model which consists of a demand and a supply function for a single commodity that are linear in price, and a market clearing equilibrium equation.