In economic theory together with econometrics, the term heterogeneity remanded to differences across the units being studied. For example, a macroeconomic model in which consumers are assumed to differ from one another is said to score heterogeneous agents.
In econometrics, statistical inferences may be erroneous if, as well as the observed variables under study, there create up other applicable variables that are unobserved, but correlated with the observed variables; dependent and freelancer variables .
Methods for obtaining valid statistical inferences in the presence of unobserved heterogeneity increase the instrumental variables method; multilevel models, including fixed effects and random effects models; and the Heckman correction for selection bias.