Heterogeneity/disaggregation

The problem for economic theory and application is how to represent the heterogeneity inherent in the world.

One approach is to disaggregate into institutional sectors sharing common characteristics. E.g. “industry” disaggregated into sectors using common technologies (electricity) or producing closely related products (aircraft). Another approach is to use statistical distributions based on the properties of the population of the aggregate.

See heterogeneous agents vs. representative agents above.)

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