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Comparing IV with structural models: what simple IV can and cannot identify

Author

Listed:
  • James Heckman

    (Institute for Fiscal Studies and University of Chicago)

  • Sergio Urzua

    (Institute for Fiscal Studies)

Abstract

This paper compares the economic questions addressed by instrumental variables estimators with those addressed by structural approaches. We discuss Marschak's Maxim: estimators should be selected on the basis of their ability to answer well-posed economic problems with minimal assumptions. A key identifying assumption that allows structural methods to be more informative than IV can be tested with data and does not have to be imposed.

Suggested Citation

  • James Heckman & Sergio Urzua, 2010. "Comparing IV with structural models: what simple IV can and cannot identify," CeMMAP working papers CWP08/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:08/10
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    File URL: http://cemmap.ifs.org.uk/wps/cwp0810.pdf
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    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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