ESTIMATION OF SHORT-RUN AND LONG-RUN ELASTICITIES OF ENERGY DEMAND FROM PANEL-DATA USING SHRINKAGE ESTIMATORS

This article discusses the problem of obtaining short-run and long-run elasticities of energy demand for each of 49 states in the United Sta tes using data for 21 years. Estimation using the time series data by each state gave several wrong signs for the coefficients. Estimation u sing pooled data was not valid because the hypothesis of homogeneity o f the coefficients was rejected. Shrinkage estimators gave more reason able results. The article presents in a unified framework the classica l, empirical Bayes, and Bayes approaches for deriving these estimators .