What Do We Learn About Consumer Demand Patterns from Micro Data?

The aim of this paper is to assess the importance of using micro-level data in the econometric analysis of consumer demand. To do this, the authors utilize a time series of repeated cross sections covering some 4,000 households in each of fifteen years. Employing a number of different aggregation procedures, they conclude that aggregate data alone are unlikely to produce reliable estimates of structural price and income coefficients. However, once certain aggregation factors as well as trend and seasonal components are included, an aggregate model is not necessarily outperformed across all demand equations in terms of forecasting ability. Copyright 1993 by American Economic Association.