{"status":"ok","message-type":"work","message-version":"1.0.0","message":{"indexed":{"date-parts":[[2026,8,21]],"date-time":"2026-08-21T12:02:42Z","timestamp":1787313762421,"version":"build-2736575974"},"reference-count":26,"publisher":"MIT Press","issue":"4","content-domain":{"domain":["direct.mit.edu"],"crossmark-restriction":true},"short-container-title":[],"published-print":{"date-parts":[[2019,10,1]]},"abstract":"<jats:title>Abstract<\/jats:title>\n                  <jats:p>We propose to use economic theories to construct shrinkage estimators that perform well when the theories' empirical implications are approximately correct but perform no worse than unrestricted estimators when the theories' implications do not hold. We implement this construction in various settings, including labor demand and wage inequality, and estimation of consumer demand. We provide asymptotic and finite sample characterizations of the behavior of the proposed estimators. Our approach is an alternative to the use of theory as something to be tested or to be imposed on estimates. Our approach complements uses of theory for identification and extrapolation.<\/jats:p>","DOI":"10.1162\/rest_a_00795","type":"journal-article","created":{"date-parts":[[2018,11,2]],"date-time":"2018-11-02T21:18:12Z","timestamp":1541193492000},"page":"681-698","update-policy":"https:\/\/doi.org\/10.1162\/mitpressjournals.corrections.policy","source":"Crossref","is-referenced-by-count":10,"title":["How to Use Economic Theory to Improve Estimators: Shrinking Toward Theoretical Restrictions"],"prefix":"10.1162","volume":"101","author":[{"given":"Pirmin","family":"Fessler","sequence":"first","affiliation":[{"name":"Foreign Research Division, Oesterreichische Nationalbank"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Maximilian","family":"Kasy","sequence":"additional","affiliation":[{"name":"Harvard University"}],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"281","published-online":{"date-parts":[[2019,10,1]]},"reference":[{"key":"2021051417214424100_B1","unstructured":"Abadie, Alberto, and MaximilianKasy, \u201cChoosing among Regularized Estimators in Empirical Economics: The Risk of Machine Learning,\u201d this review (forthcoming)."},{"key":"2021051417214424100_B2","doi-asserted-by":"crossref","unstructured":"Acemoglu, Daron, and DavidAutor, \u201cSkills, Tasks and Technologies: Implications for Employment and Earnings\u201d (4:1043\u20131171), in Handbook of Labor Economics (Amsterdam: Elsevier, 2011).","DOI":"10.1016\/S0169-7218(11)02410-5"},{"key":"2021051417214424100_B3","doi-asserted-by":"crossref","unstructured":"Autor, David H., Lawrence F.Katz, and Melissa S.Kearney, \u201cTrends in US Wage Inequality: Revising the Revisionists,\u201d this review90 (2008), 300\u2013323.","DOI":"10.1162\/rest.90.2.300"},{"key":"2021051417214424100_B4","doi-asserted-by":"crossref","unstructured":"Blundell, Richard, JoelHorowitz, and MatthiasParey, \u201cNonparametric Estimation of a Nonseparable Demand Function under the Slutsky Inequality Restriction,\u201d this review99 (2017), 291\u2013304.","DOI":"10.1162\/REST_a_00636"},{"key":"2021051417214424100_B5","doi-asserted-by":"crossref","unstructured":"Borjas, George J., JeffreyGrogger, and Gordon H.Hanson, \u201cComment: On Estimating Elasticities of Substition,\u201d Journal of the European Economic Association10 (2012), 198\u2013210.","DOI":"10.1111\/j.1542-4774.2011.01055.x"},{"key":"2021051417214424100_B6","doi-asserted-by":"crossref","unstructured":"Card, David\n          , \u201cImmigration and Inequality,\u201d American Economic Review99: 2 (2009), 1\u201321.","DOI":"10.1257\/aer.99.2.1"},{"key":"2021051417214424100_B7","unstructured":"Casella, George, and Roger L.Berger, Statistical Inference (Pacific Grove, CA: Duxbury Press, 2001)."},{"key":"2021051417214424100_B8","doi-asserted-by":"crossref","unstructured":"Dette, Holger, StefanHoderlein, and NatalieNeumeyer, \u201cTesting Multivariate Economic Restrictions Using Quantiles: The Example of Slutsky Negative Semidefiniteness,\u201d Journal of Econometrics191 (2016), 129\u2013144.","DOI":"10.1016\/j.jeconom.2015.07.004"},{"key":"2021051417214424100_B9","doi-asserted-by":"crossref","unstructured":"Fortin, Nicole M., and ThomasLemieux, \u201cInstitutional Changes and Rising Wage Inequality: Is There a Linkage?\u201d Journal of Economic Perspectives11 (1997), 75\u201396.","DOI":"10.1257\/jep.11.2.75"},{"key":"2021051417214424100_B10","doi-asserted-by":"crossref","unstructured":"Hansen, Bruce E.\n          , \u201cEfficient Shrinkage in Parametric Models,\u201d Journal of Econometrics190:1 (2016), 115\u2013132.","DOI":"10.1016\/j.jeconom.2015.09.003"},{"key":"2021051417214424100_B11","doi-asserted-by":"crossref","unstructured":"Hausman, Jerry A., and Whitney K.Newey, \u201cIndividual Heterogeneity and Average Welfare,\u201d Econometrica84 (2016), 1225\u20131248.","DOI":"10.3982\/ECTA11899"},{"key":"2021051417214424100_B12","doi-asserted-by":"crossref","unstructured":"Hoderlein, Stefan, and AnneVanhems, \u201cWelfare Analysis Using Nonseparable Models,\u201d CEMMAP working paper (2010).","DOI":"10.1920\/wp.cem.2011.0111"},{"key":"2021051417214424100_B13","doi-asserted-by":"crossref","unstructured":"Imbens, Guido W., and Whitney K.Newey, \u201cIdentification and Estimation of Triangular Simultaneous Equations Models without Additivity,\u201d Econometrica77 (2009), 1481\u20131512.","DOI":"10.3982\/ECTA7108"},{"key":"2021051417214424100_B14","unstructured":"James, William, and CharlesStein, \u201cEstimation with Quadratic Loss\u201d (pp. 361\u2013379), in Proceedings of the Fourth Berkeley Symposium on Mathematical Statistics and Probability, vol. 1 (Berkeley: University of California Press, 1961)."},{"key":"2021051417214424100_B15","unstructured":"Jensen, Michael C., FischerBlack, and Myron S.Scholes, \u201cThe Capital Asset Pricing Model: Some Empirical Tests,\u201d in Michael C.Jensen, ed., Studies in the Theory of Capital Markets (Westport, CT: Praeger, 1972)."},{"key":"2021051417214424100_B16","doi-asserted-by":"crossref","unstructured":"Koenker, Roger\n          , \u201cQuantile Regression\u201d (2005), http:\/\/www.econ.uiuc.edu\/\u223croger\/research\/rq\/rq.html","DOI":"10.1017\/CBO9780511754098"},{"key":"2021051417214424100_B17","doi-asserted-by":"crossref","unstructured":"Laird, Nan M., and Thomas A.Louis, \u201cEmpirical Bayes Confidence Intervals Based on Bootstrap Samples,\u201d Journal of the American Statistical Association82 (1987), 739\u2013750.","DOI":"10.1080\/01621459.1987.10478490"},{"key":"2021051417214424100_B18","doi-asserted-by":"crossref","unstructured":"Leeb, Hannes, and Benedikt M.P\u00f6tscher, \u201cModel Selection and Inference: Facts and Fiction,\u201d Econometric Theory21:1 (2005), 21\u201359.","DOI":"10.1017\/S0266466605050036"},{"key":"2021051417214424100_B19","unstructured":"Mas-Colell, Andreu, Michael DennisWhinston, and Jerry R.Green, Microeconomic Theory (New York: Oxford University Press, 1995)."},{"key":"2021051417214424100_B20","doi-asserted-by":"crossref","unstructured":"McFadden, Daniel L.\n          , \u201cRevealed Stochastic Preference: A Synthesis,\u201d Economic Theory, 26 (2005), 245\u2013264.","DOI":"10.1007\/s00199-004-0495-3"},{"key":"2021051417214424100_B21","doi-asserted-by":"crossref","unstructured":"Morris, Carl N.\n          , \u201cParametric Empirical Bayes Inference: Theory and Applications,\u201d Journal of the American Statistical Association78 (1983), 47\u201355.","DOI":"10.1080\/01621459.1983.10477920"},{"key":"2021051417214424100_B22","unstructured":"Robbins, Herbert\n          , \u201cAn Empirical Bayes Approach to Statistics,\u201d in Proceedings of the Third Berkeley Symposium on Mathematical Statistics and Probability, vol. 1: Contributions to the Theory of Statistics (Berkeley: Regents of the University of California, 1956)."},{"key":"2021051417214424100_B23","doi-asserted-by":"crossref","unstructured":"Stein, Charles M.\n          , \u201cEstimation of the Mean of a Multivariate Normal Distribution,\u201d Annals of Statistics9 (1981), 1135\u20131151.","DOI":"10.1214\/aos\/1176345632"},{"key":"2021051417214424100_B24","unstructured":"Train, Kenneth E.\n          , Discrete Choice Methods with Simulation (Cambridge: Cambridge University Press, 2009)."},{"key":"2021051417214424100_B25","unstructured":"van der Vaart, Aad W.\n          , Asymptotic Statistics (Cambridge: Cambridge University Press, 2000)."},{"key":"2021051417214424100_B26","doi-asserted-by":"crossref","unstructured":"Xie, Xianchao, S. C.Kou, and Lawrence D.Brown, \u201cSURE Estimates for a Heteroscedastic Hierarchical Model,\u201d Journal of the American Statistical Association107 (2012), 1465\u20131479.","DOI":"10.1080\/01621459.2012.728154"}],"container-title":["The Review of Economics and Statistics"],"original-title":[],"language":"en","link":[{"URL":"http:\/\/direct.mit.edu\/rest\/article-pdf\/101\/4\/681\/1916600\/rest_a_00795.pdf","content-type":"application\/pdf","content-version":"vor","intended-application":"syndication"},{"URL":"http:\/\/direct.mit.edu\/rest\/article-pdf\/101\/4\/681\/1916600\/rest_a_00795.pdf","content-type":"unspecified","content-version":"vor","intended-application":"similarity-checking"}],"deposited":{"date-parts":[[2021,5,14]],"date-time":"2021-05-14T13:26:27Z","timestamp":1620998787000},"score":1,"resource":{"primary":{"URL":"https:\/\/direct.mit.edu\/rest\/article\/101\/4\/681\/58568\/How-to-Use-Economic-Theory-to-Improve-Estimators"}},"subtitle":[],"short-title":[],"issued":{"date-parts":[[2019,10,1]]},"references-count":26,"journal-issue":{"issue":"4","published-online":{"date-parts":[[2019,10,1]]},"published-print":{"date-parts":[[2019,10,1]]}},"URL":"https:\/\/doi.org\/10.1162\/rest_a_00795","relation":{},"ISSN":["0034-6535","1530-9142"],"issn-type":[{"value":"0034-6535","type":"print"},{"value":"1530-9142","type":"electronic"}],"subject":[],"published-other":{"date-parts":[[2019,10]]},"published":{"date-parts":[[2019,10,1]]}}}