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Aggregation, Heterogeneity and Risk: Adding Apples and Oranges, or Apples and Apples

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  • Pope, Rulon

Abstract

Approaches to aggregation are reviewed. These consist of random parameters, random right hand side variables (Stoker's approach}. and exact aggregation. Each approach utilizes different assumptions and has weaknesses. In a sense, exact aggregation is the nonparametric approach. The penultimate section of the paper shows that these concepts may be very important for risk analysis. A simulation model gives substantially biased estimates of regression parameters when exact aggregation procedures are not followed.

Suggested Citation

  • Pope, Rulon, 1990. "Aggregation, Heterogeneity and Risk: Adding Apples and Oranges, or Apples and Apples," 1990 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk Meeting, January 28-31, 1990, Sanibel Island, Florida 271538, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    • Handle: RePEc:ags:rrsr90:271538
    DOI: 10.22004/ag.econ.271538
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    References listed on IDEAS

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    1. Richard E. Just, 1974. "An Investigation of the Importance of Risk in Farmers' Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(1), pages 14-25.
    2. Chambers, Robert G. & Pope, Rulon D., 1989. "What Do Aggregate Agricultural Supply and Demand Curves Mean?," Working Papers 197605, University of Maryland, Department of Agricultural and Resource Economics.
    3. Chambers, Robert G. & Pope, Rulon D., 1989. "What Do Aggregate Agricultural Supply and Demand Curves Mean?," 1990 Conference (34th), February 13-15, 1990, Brisbane, Australia 144922, Australian Agricultural and Resource Economics Society.
    4. Haltiwanger, John C & Waldman, Michael, 1989. "Rational Expectations in the Aggregate," Economic Inquiry, Western Economic Association International, vol. 27(4), pages 619-636, October.
    5. Roger K. Conway & Michael R. LeBlanc & P. A. V. B. Swamy, 1988. "The stochastic coefficients approach to econometric modeling, part II: description and motivation," Finance and Economics Discussion Series 30, Board of Governors of the Federal Reserve System (U.S.).
    6. Quirino Paris, 1980. "Perfect Aggregation and Disaggregation of Complementarity Problems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(4), pages 681-688.
    7. McDonald, James B & Butler, Richard J, 1987. "Some Generalized Mixture Distributions with an Application to Unemployment Duration," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 232-240, May.
    8. John Muellbauer, 1975. "Aggregation, Income Distribution and Consumer Demand," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 42(4), pages 525-543.
    9. Lau, Lawrence J., 1982. "A note on the fundamental theorem of exact aggregation," Economics Letters, Elsevier, vol. 9(2), pages 119-126.
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    Cited by:

    1. Pope, Rulon D., 1994. "A Perspective On Duality And Production Economics," 1994 Annual Meeting, August 7-10, San Diego, California 271411, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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