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

Heckman, James J.; Urzua, Sergio

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

NBER Working Paper No. w14706

33 Pages Posted: 17 Feb 2009 Last revised: 8 Sep 2022

See all articles by James J. Heckman

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Sergio Urzua

Northwestern University

There are 2 versions of this paper

Date Written: February 2009

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: Suggested Citation

Heckman, James J. and Urzua, Sergio Samuel, Comparing IV with Structural Models: What Simple IV Can and Cannot Identify (February 2009). NBER Working Paper No. w14706, Available at SSRN: https://ssrn.com/abstract=1344688