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Heterogeneity and Aggregation

Richard Blundell¹; Thomas M. Stoker²

¹ Institute for Fiscal Studies and Department of Economics, University College London. · ² Sloan School of Management, Massachusetts Institute of Technology.

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.

DOI

10.1257/0022051054661486

Volume

43 (2)

Pages

347-391

Language

en

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