• Table of Contents
    • Abstract
    • Keywords
    • Article
      • Leontief's theorem
      • Hicks–Leontief aggregation
      • Aggregation in consumption
      • Aggregation in production
      • Capital aggregation
      • Labour and output aggregation
      • Houthakker–Sato aggregation conditions
      • Fisher's simulations
      • Implications for empirical work
      • Why do economists continue using aggregate production functions?
    • See Also
    • Bibliography
    • How to cite this article

aggregation (production)

Jesus Felipe and Franklin M. Fisher
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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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.
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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. 24 November 2017 <http://www.dictionaryofeconomics.com/article?id=pde2008_A000059> doi:10.1057/9780230226203.0019

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