Aggregating Quasi-fixed Factors

Abstract

The problem of aggregating quasi-fixed factors within the context of the adjustment-cost model is addressed. Two alternative theoretical justifications are considered, one based on a form of Hicks’ aggregation and the other on weak separability. It is argued that the latter is not relevant to practical situations. On the other hand, the former can be used to justify empirical dynamic factor demand studies which employ aggregated input categories. Some implications for data construction procedures are discussed. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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