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Intangibles and Microdata Analysis

Intangibles and Microdata Analysis. Comments on. Discussion by Susanto Basu. 2008 World Congress on National Accounts, May 13, 2008. What we want to do. Take measurement seriously Use theory as a guide—so start from optimizing units: Firms, consumers

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Intangibles and Microdata Analysis

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  1. IntangiblesandMicrodata Analysis Comments on Discussion by Susanto Basu 2008 World Congress on National Accounts, May 13, 2008

  2. What we want to do • Take measurement seriously • Use theory as a guide—so start from optimizing units: Firms, consumers • Then use this work to say something about aggregates: Connect micro to macro Comments on sessions 1 and 2

  3. What is macroeconomics? “Macroeconomics is microeconomics plus aggregation” --Frank Fisher Comments on sessions 1 and 2

  4. Dominant approach:Macroeconomics is microeconomics • Most DSGE theory • Most macro uses of micro-econometrics • Exceptions rarely connect theory, data & GE Comments on sessions 1 and 2

  5. Whither aggregation? • Implicit in macro uses of microdata:Learning about micro parameters tells us what we need for macro • Houthakker (1955) example: • All micro substitution elasticities zero • Macro elasticity is one • Macro parameter can be outside the support of the micro distribution. Empirical support. Comments on sessions 1 and 2

  6. Macro and micro parameters • Macro parameters are simply different objects • Cannot infer from micro estimates directly • Especially since most micro estimates treat individual / firm heterogeneity as “nuisance parameters” Comments on sessions 1 and 2

  7. Two unpalatable alternatives • Macro parameter estimation using only macro data • Would work in Houthakker’s example • Basu-Fernald (1997) present examples both ways • Generally, macro parameter instability due to changes in micro distributions Comments on sessions 1 and 2

  8. Two unpalatable alternatives, cont’d • Derive all macro parameters using explicit aggregation over micro heterogeneity • Individual micro data series short / noisy • Need micro census to do any macro? Comments on sessions 1 and 2

  9. My own take • Option 1 the lesser evil; more likely to be the conceptually correct parameter • Until we are willing / able to do explicit aggregation, we can overdo “microfoundations of macroeconomics” Comments on sessions 1 and 2

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