A Decision-Theoretic Approach to the Aggregation Problem at the Pre-Data-Collection Stage

Abstract

We present a decision-theoretic approach to finding optimal aggregation schemes when the aggregation is made at the pre-data-collection stage. A criterion is presented for the optimal aggregation of variables, its properties are analyzed, and it is compared with other criteria in the literature for good aggregation. In the course of determining this criterion, we derive endogenously the disaggregation procedure by which inferences about disaggregated data are made from aggregated data. It is shown that our analysis can be used to determine optimal aggregation schemes in input-output analysis. We apply our model, as an example, to data from the Netherlands.