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A Practical Log-Linear Aggregation Method with Examples: Heterogeneous Income Growth in the USA

Listed author(s):
  • Pedro Albuquerque

    ()

    (Euromed Marseille - École de management - Association Euromed Management - Marseille, DEFI - Centre de recherche en développement économique et finance internationale - Université de la Méditerranée - Aix-Marseille 2 - Faculté des Sciences Economiques)

A practical aggregation method for heterogeneous log-linear functions is presented. Inequality measures are employed in the construction of a simple but exact aggregate representation of an economy. Three macroeconomic applications are discussed: the aggregation of the Lucas supply function, the time-inconsistent behaviour of an egalitarian social planner facing heterogeneous discount rates, and the case of a simple heterogeneous growth model. In the latter application, aggregate CPS data is used to show that the slowdown that followed the first oil shock is worse than usually thought, and that the "new economy" growth resurgence is not as strong as it appears.

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Paper provided by HAL in its series Post-Print with number halshs-00743830.

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Date of creation: 04 Sep 2003
Publication status: Published in Journal of Applied Econometrics, Wiley, 2003, 18 (6), pp.665-678. <10.1002/jae.715>
Handle: RePEc:hal:journl:halshs-00743830
DOI: 10.1002/jae.715
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00743830
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. Constantinides, George M & Duffie, Darrell, 1996. "Asset Pricing with Heterogeneous Consumers," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 219-240, April.
  2. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
  3. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
  4. Bourguignon, Francois, 1979. "Decomposable Income Inequality Measures," Econometrica, Econometric Society, vol. 47(4), pages 901-920, July.
  5. Stoker, Thomas M, 1993. "Empirical Approaches to the Problem of Aggregation Over Individuals," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1827-1874, December.
  6. van Garderen, Kees Jan & Lee, Kevin & Pesaran, M. Hashem, 2000. "Cross-sectional aggregation of non-linear models," Journal of Econometrics, Elsevier, vol. 95(2), pages 285-331, April.
  7. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-597, June.
  8. Orazio P. Attanasio & Guglielmo Weber, 1993. "Consumption Growth, the Interest Rate and Aggregation," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 631-649.
  9. Arthur Lewbel, 1992. "Aggregation with Log-Linear Models," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 635-642.
  10. George Loewenstein & Richard H Thaler, 2003. "Anomalies: Intertemporal Choice," Levine's Working Paper Archive 618897000000000784, David K. Levine.
  11. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
  12. Maasoumi, Esfandiar, 1986. "The Measurement and Decomposition of Multi-dimensional Inequality," Econometrica, Econometric Society, vol. 54(4), pages 991-997, July.
  13. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, March.
  14. Stoker, Thomas M, 1986. "Simple Tests of Distributional Effects on Macroeconomic Equations," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 763-795, August.
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