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Comparing IV with structural models: what simple IV can and cannot identify

Authors: James Heckman and Sergio Urzua
Date: 31 May 2010
Type: Journal article, Journal of Econometrics, Vol. 156, No. 1, pp. 27--37
DOI: 10.1016/j.jeconom.2009.09.006

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.

Previous version:
James Heckman and Sergio Urzua April 2010, Comparing IV with structural models: what simple IV can and cannot identify, cemmap Working Paper, CWP08/10

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