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Aggregation biases in empirical Euler consumption equations: evidence from Spanish data

Author

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  • Oscar Antonio Cutanda

    (Department of Economic Analysis, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia, Spain)

  • José María Labeaga

    (Department of Economic Analysis II, UNED, UNED Calle de Bravo Murillo 38, 28015 Madrid, Spain)

  • Juan Sanchis-Llopis

    (Department of Economic Structure, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia, Spain)

Abstract

In this paper we investigate the implications of aggregation in empirical analyses of Euler equations for consumption. We compare the results obtained after estimating the samemodel, using total and non-durable microeconomic consumption household data, from themaximum aggregation level (National Accounts) to individual data from the SpanishExpenditure Survey (Encuesta Continua de Presupuestos Familiares). We also use thesurvey to build cohort and aggregate data to test the model using different aggregatemeasures of consumption. The results we obtain confirm the theoretical predictionssummarised in Blundell and Stoker (2005) as well as in previous empirical evidence, i.e.aggregation turns out to be crucial to study empirically Euler equations for consumption. The estimated EIS with aggregated data is biased as compared with the correspondingestimate with microeconomic data. Further, the size of the bias increased with the level ofaggregation.

Suggested Citation

  • Oscar Antonio Cutanda & José María Labeaga & Juan Sanchis-Llopis, 2018. "Aggregation biases in empirical Euler consumption equations: evidence from Spanish data," Working Papers 1801, Department of Applied Economics II, Universidad de Valencia.
    • Handle: RePEc:eec:wpaper:1801
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    Cited by:

    1. Antonio Cutanda & Juan A. Sanchis, 2022. "Labour supply responses to income tax changes in Spain," Working Papers 2207, Department of Applied Economics II, Universidad de Valencia.
    2. Antonio Cutanda & Juan A. Sanchis-Llopis, 2022. "Human capital and the intertemporal substitution for leisure: empirical evidence for Spain," Working Papers 2116, Department of Applied Economics II, Universidad de Valencia.
    3. Antonio Cutanda & Juan A. Sanchis-Llopis, 2021. "Joint estimation of intertemporal labor and consumption decisions: evidence from Spanish households headed by working men," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(4), pages 611-629, December.
    4. Antonio Cutanda & Juan A. Sanchis-Llopis, 2023. "Human capital and the intertemporal substitution for leisure: empirical evidence for Spain," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 22(3), pages 377-396, September.
    5. Juan Alberto Sanchis Llopis & Antonio Cutanda, 2023. "Labour Supply Responses to Income Tax Changes in Spain," Hacienda Pública Española / Review of Public Economics, IEF, vol. 245(2), pages 71-94, June.
    6. J. Andrés & J.E. Boscá & R. Doménech & J. Ferri, 2024. "Transitioning to Net-Zero: Macroeconomic Implications and Welfare Assessment," Studies on the Spanish Economy eee2024-01, FEDEA.
    7. Antonio Cutanda Tarín, 2019. "Intertemporal substitution in the Spanish economy: Evidence from regional data," Metroeconomica, Wiley Blackwell, vol. 70(1), pages 209-229, February.

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    More about this item

    Keywords

    aggregation; intertemporal consumption; microeconomic data;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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