Marc Nerlove, Distinguished Fellow 2012
In a career spanning 58 years and counting Marc Nerlove developed widely used econometric methods in the course of addressing important empirical problems. In early research, he developed dynamic models of producer supply that enabled economists to distinguish and to quantify lags due to costs of adjustment and lags due to expectations of future events. In a series of influential papers he applied these tools to the dynamics of agricultural supply and created a template that continues to be used on a wide scale in studies around the world. His framework made it possible to identify both short run and long run elasticities of supply in response to product price.
Nerlove pioneered the development of modern time series methods including the application of spectral analysis to aggregate economic time series and the development of unobserved components and time series factor models that formalized the Burns-Mitchell decompositions into trend, cycle, and irregular components. This research stimulated the time series index models by Sargent, Sims, Geweke, Engel, Watson and others.
Nerlove’s research on the electricity industry in the early 1960s was the first application of duality theory to estimate production functions. He estimated cost functions and from them obtained estimates of firm technology. His magisterial book, Estimation and Identification of Cobb-Douglas Production Functions, helped to introduce the concept of partial identification into econometrics and is a prototype for synthesizing economics and statistics to address important economic questions. Nerlove pioneered the analysis of panel data in econometrics. His fundamental work with Balestra and his subsequent solo research developed widely used frameworks for analyzing dynamic models for panel data in the presence of individual-specific temporally persistent unobservables. The research arose from a practical problem in analyzing and interpreting estimates of the demand for durable goods.
Nerlove, with Razin, has also done basic research on economic demography and life cycle fertility in dynamic equilibrium settings with overlapping generations. Throughout his long and distinguished career, Nerlove has exemplified the best in applied economics. He brings rigor to the study of important economic problems. He developed empirically relevant econometric tools and showed by example the importance of using economics and econometrics to analyze economic data. Marc Nerlove’s appointment as Distinguished Fellow of the American Economic Association recognizes his outstanding contributions to economics and econometrics.