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

34 Pages Posted: 2 Feb 2009

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

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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.

Keywords: instrumental variables, structural approaches, Marschak's Maxim

JEL Classification: C31

Suggested Citation

Heckman, James J. and Urzua, Sergio Samuel, Comparing IV with Structural Models: What Simple IV Can and Cannot Identify. IZA Discussion Paper No. 3980. Available at SSRN: https://ssrn.com/abstract=1336097

James J. Heckman (Contact Author)

University of Chicago - Department of Economics ( email )

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Sergio Samuel Urzua

Northwestern University ( email )

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Evanston, IL 60208
United States

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