Working Paper

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


James Heckman, Sergio Urzua

Published Date

24 April 2010


Working Paper (CWP08/10)

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.