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Comparing IV with Structural Models: What Simple IV Can and Cannot Identify

Listed author(s):
  • Heckman, James J.

    ()

    (University of Chicago)

  • Urzua, Sergio

    ()

    (University of Maryland)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3980.

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Length: 34 pages
Date of creation: Jan 2009
Publication status: published in: Journal of Econometrics, 2010, 156 (1), 27-37
Handle: RePEc:iza:izadps:dp3980
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  21. Sergio Urzúa, 2008. "Racial Labor Market Gaps: The Role of Abilities and Schooling Choices," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
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  26. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "2001 Lawrence R. Klein Lecture Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 361-422, 05.
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  35. Bjorklund, Anders & Moffitt, Robert, 1987. "The Estimation of Wage Gains and Welfare Gains in Self-selection," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 42-49, February.
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