Labor-market heterogeneity, aggregation, and the Lucas critique
By: Yongsung Chang, Sun-Bin Kim, Frank Schorfheide
Contributors: Kim, Sun-Bin; Schorfheide, Frank; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16401; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16401.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] /
Description: "This paper assesses biases in policy predictions due to the lack of invariance of "structural'' parameters in representative-agent models.  We simulate data under various fiscal policy regimes from a heterogeneous-agents economy with incomplete asset markets and indivisible labor supply.  Imperfect aggregation manifests itself through preference shocks in the estimated representative-agent model.  Preference and technology parameter estimates are not invariant with respect to policy changes.  As a result, the bias in the representative-agent model's policy predictions is large compared to the length of predictive intervals that reflect parameter uncertainty"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 2/10/2011.

Includes bibliographical references.

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