aggregation (production)
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by
Steven
N.
Durlauf
and
Lawrence
E.
Blume
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Abstract
Aggregation concerns the conditions under which several variables can be treated as one, or macro-relationships derived from micro-relationships. This problem is especially important in production, where, without proper aggregation, one cannot interpret the properties of the aggregate production function. The conditions under which aggregate production functions exist are so stringent that real economies surely do not satisfy them. The aggregation results pose insurmountable problems for theoretical and applied work in fields such as growth, labour or trade. They imply that intuitions based on micro variables and micro production functions will often be false when applied to aggregates.
Keywords
aggregation (production); Cambridge capital theory debates; capital aggregation; Cobb–Douglas functions; endogenous growth; growth accounting; Hicks, J.; Hicks–Leontief aggregation; labour aggregation; Leontief, W.; National Income and Products Account (NIPA); neoclassical growth theory; output aggregation; production functions; productivity (measurement problems); total factor productivity
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How to cite this article
Felipe, Jesus and Franklin M. Fisher. "aggregation (production)." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 18 May 2013 <http://www.dictionaryofeconomics.com/article?id=pde2008_A000059> doi:10.1057/9780230226203.0019

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