What is the difference between aggregation and aggregate
Combination of several individual variables with regard to a characteristic of the same type in order to gain connections, e.g. combining the demand of the individual households with the total demand of the relevant market
The level of aggregation is determined by the question at hand. Macroeconomic laws are often developed from corresponding microeconomic behavior equations by way of the assumption of analogy while avoiding the aggregation problem. It is typically assumed that economic agents act rationally (utility-maximizing households, profit-maximizing companies). The macroeconomic behavioral hypotheses then have a microeconomic foundation. This is characteristic of New Keynesian macroeconomics.
At the highest level of aggregation are the variables of macroeconomics, e.g. the total demand for goods of an economy.
Transition from more narrowly defined to more broadly defined variables(Variable aggregation) or transition from parameters for more narrowly defined (partial) totalities to parameters that relate to comprehensive totalities (Sector aggregation).
Examples for variable aggregation: the transition from individual income types to total income or the transition from quarterly values to annual values (temporal aggregation); for sector aggregation: transition from the average income in the federal states to the average income in Germany.
The average behavior of groups of economic subjects is used as the basis for estimating macroeconomic relations. This requires a summary of microeconomic facts about households and companies. A consistent aggregation as a logical-deductive derivation of a macro system from the corresponding microsystem is only possible under very special conditions. In specifications of econometric models, therefore, microeconomic behavioral hypotheses are usually transferred in an analogous way to the relationships between the macroeconomic variables.
Compression of data. In data modeling, aggregation means grouping together different object types that are related to one another to form a higher object type, so that the following can be referred to the higher object type as a whole. This approach has the advantages of greater consistency and less redundancy.
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