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Shrinking the Posterior: A Note on the Nerlovian Model

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  • Richard Tiffin

Abstract

Diebold and Lamb (1997) argue that since the long‐run elasticity of supply derived from the Nerlovian model entails a ratio of random variables, it is without moments. They propose minimum expected loss estimation to correct this problem but in sodoing ignore the fact that a non white‐noise‐error is implicit in the model. We show that, as a consequence the estimator is biased and demonstrate that Bayesian estimation which fully accounts for the error structure is preferable.

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  • Richard Tiffin, 2004. "Shrinking the Posterior: A Note on the Nerlovian Model," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(1), pages 115-121, March.
    • Handle: RePEc:bla:jageco:v:55:y:2004:i:1:p:115-121
    DOI: 10.1111/j.1477-9552.2004.tb00083.x
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    Cited by:

    1. Traoré, Fousseini, 2013. "Estimating the supply elasticity of cotton in Mali with the Nerlove Model: A bayesian method of moments approach," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 94(3).

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