Comparing IV With Structural Models: What Simple IV Can and Cannot Identify
J. Heckman and Sergio Urzua
,
1
(
156
)
Journal of Econometrics
27-37
May
2010
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.