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

  • Sergio Urzua

    (Northwestern University)

  • James J. Heckman

    (University of Chicago & University College Dublin)

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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File URL: http://www.ucd.ie/geary/static/publications/workingpapers/gearywp200906.pdf
File Function: First version, 2009
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Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 200906.

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Length: 33 pages
Date of creation: 09 Mar 2009
Date of revision:
Handle: RePEc:ucd:wpaper:200906
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  22. Flavio Cunha & James J. Heckman & Salvador Navarro, 2007. "The Identification and Economic Content of Ordered Choice Models with Stochastic Thresholds," NBER Technical Working Papers 0340, National Bureau of Economic Research, Inc.
  23. Flavio Cunha & James J. Heckman, 2007. "The Evolution of Inequality, Heterogeneity and Uncertainty in Labor Earnings in the U.S. Economy," NBER Working Papers 13526, National Bureau of Economic Research, Inc.
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