Econometrica: Jul 1977, Volume 45, Issue 5

Application of Pre-Test and Stein Estimators to Economic Data<1279:AOPASE>2.0.CO;2-S
p. 1279-1288

Dennis J. Aigner, George G. Judge

A limiting feature of several theoretically superior "shrinkage" estimators for the linear regression model lies in the fact that there must be a certain degree of orthogonality in regressors in order for them to dominate the ordinary least squares estimator. In this paper we apply variants of pre-test and Stein estimators to data on international trade, and discuss their merits in light of the limitations imposed by the non-orthogonality of these and other sets of economic data.

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