Can Aggregation Across Goods be Achieved by Neglecting The Problem? Property Inheritance and Aggregation Bias

Bertrand Koebel

International Economic Review, 2002, vol. 43, issue 1, 223-255

Abstract: This article studies the problem of composite commodity in two different frameworks. In one case, aggregation across goods is analyzed for elementary goods that satisfy an optimality condition. The unrestricted case is also examined. The notion of an approximate aggregate representation is formalized and shown to be always possible. Can thereby aggregation issues simply be neglected in economic contributions? I show that the standard economic properties of initial functions are not necessarily inherited by the approximate aggregate. The severity of this problem and the size of the aggregation bias across inputs are investigated empirically. Copyright 2002 by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Resarch Association

Date: 2002
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