Instrumental Variables: A Cautionary Tale
This paper considers the use of instrumental variables to estimate the mean effect of treatment on the treated. It reviews previous work on this topic by Heckman and Robb (1985, 1986) and demonstrates that (a) unless the effect of treatment is the same for everyone (conditional on observables), or (b) treatment effects are variable across persons but the person-specific component of the variability not forecastable by observables does not determine participation in the program, widely-used instrumental variable methods produce inconsistent estimators of the parameter of interest. Neither assumption is very palatable. The first assumes a homogeneity that is implausible. The second assumes either very rich data available to the econometrician or that the persons being studied either do not have better information than the econometrician or that they do not use it. Instrumental variable methods do not provide a general solution to the evaluation problem.
|Date of creation:||Sep 1995|
|Date of revision:|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Heckman, James J, 1978.
"Dummy Endogenous Variables in a Simultaneous Equation System,"
Econometric Society, vol. 46(4), pages 931-59, July.
- James J. Heckman, 1977. "Dummy Endogenous Variables in a Simultaneous Equation System," NBER Working Papers 0177, National Bureau of Economic Research, Inc.
- Nancy Clements & James Heckman & Jeffrey Smith, 1994. "Making the Most Out Of Social Experiments: Reducing the Intrinsic Uncertainty in Evidence from Randomized Trials with an Application to the JTPA Exp," NBER Technical Working Papers 0149, National Bureau of Economic Research, Inc.
- James J. Heckman & Jeffrey A. Smith, 1998. "Evaluating the Welfare State," NBER Working Papers 6542, National Bureau of Economic Research, Inc.
- J.D. Angrist & Guido W. Imbens & D.B. Rubin, 1993. "Identification of Causal Effects Using Instrumental Variables," NBER Technical Working Papers 0136, National Bureau of Economic Research, Inc.
- Robert J. Willis & Sherwin Rosen, 1978.
"Education and Self-Selection,"
NBER Working Papers
0249, National Bureau of Economic Research, Inc.
- Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records," American Economic Review, American Economic Association, vol. 80(3), pages 313-36, June.
- Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-49, September.
- LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberte:0185. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.