Title: Labor-market heterogeneity, aggregation, and the Lucas critique
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.