DEMAND FOR COAL: THE PROBLEM OF AGGREGATION

This paper demonstrates the differences that result from estimating coal demand functions using highly aggregated regional data rather than less aggregated state data. At first glance the coal demand functions based on regional data appear to explain well and seem useful in policy making. However, coal demand functions based on state data show differences in the demand structure in each state of the region. Policy decisions that may seem appropriate based on aggregated regional data may have much different impacts on individual states in the region.