When can micro properties be used to predict aggregate demand?
Heterogeneity in consumer behaviour creates differences in demand responses, which may create problems with aggregation across consumers. If aggregation problems exist, results from estimation based on aggregate data may prove difficult to interpret. Using estimation results from micro data to predict aggregate demand responses may also create disaggregation bias (the reverse aggregation problem). The aim of this paper is to discuss potential problems of using micro data to predict aggregate demand, and how such problems relate to the linear and non-linear aggregation problem. We also expand the theories of linear and non-linear aggregation to the case in which prices vary across agents. We formulate and test criteria for aggregation by using data on Norwegian household electricity consumption. We find clear evidence of aggregation problems, as heterogeneity in both price and income derivatives are significant. We thus expect to experience problems with aggregation when analysing Norwegian household electricity consumption.
|Date of creation:||Mar 2006|
|Date of revision:|
|Contact details of provider:|| Postal: P.O.Box 8131 Dep, N-0033 Oslo, Norway|
Phone: (+47) 21 09 00 00
Fax: +47 - 62 88 55 95
Web page: http://www.ssb.no/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frank T. Denton & Dean C. Mountain, 2002.
"Aggregation Effects on Price and Expenditure Elasticities in a Quadratic Almost Ideal Demand System,"
Quantitative Studies in Economics and Population Research Reports
374, McMaster University.
- Frank Denton & Dean Mountain, 2004. "Aggregation effects on price and expenditure elasticities in a quadratic almost ideal demand system," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 613-628, August.
- Buse, Adolf, 1992. "Aggregation, Distribution and Dynamics in the Linear and Quadratic Expenditure Systems," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 45-53, February.
- Lau, Lawrence J. & Wu, Ho-Mou, 1996. "Exact aggregation under summability and homogeneity with individually variable prices," Economics Letters, Elsevier, vol. 50(3), pages 329-335, March.
- Lau, Lawrence J., 1982. "A note on the fundamental theorem of exact aggregation," Economics Letters, Elsevier, vol. 9(2), pages 119-126.
- Richard Blundell & Costas Meghir & Guglielmo Weber, 1993.
"Aggregation and consumer behaviour: some recent results,"
IFS Working Papers
W93/06, Institute for Fiscal Studies.
- Blundell, Richard & Meghir, Costas & Weber, Guglielmo, 1993. "Aggregation and consumer behaviour: some recent results," Ricerche Economiche, Elsevier, vol. 47(3), pages 235-252, September.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
- 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 570-97, June.
- Stoker, Thomas M, 1986. "Simple Tests of Distributional Effects on Macroeconomic Equations," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 763-95, August.
- Lau, Lawrence J. & Wu, Ho-mou, 1987. "Exact aggregation when prices are variable across individuals," Economics Letters, Elsevier, vol. 25(1), pages 3-7.
- Denton, Frank T. & Mountain, Dean C., 2001. "Income distribution and aggregation/disaggregation biases in the measurement of consumer demand elasticities," Economics Letters, Elsevier, vol. 73(1), pages 21-28, October.
When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:452. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (L MaasÃ¸)
If references are entirely missing, you can add them using this form.