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

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  • Heckman, James J.

    (University of Chicago)

  • Urzua, Sergio

    (University of Maryland)

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

  • Heckman, James J. & Urzua, Sergio, 2009. "Comparing IV with Structural Models: What Simple IV Can and Cannot Identify," IZA Discussion Papers 3980, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3980
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    References listed on IDEAS

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    More about this item

    Keywords

    Marschak's Maxim; instrumental variables; structural approaches;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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