Comparing IV With Structural Models: What Simple IV Can and Cannot Identify
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.
We thank Donna Gilleskie, Daniel Schmierer, Greg Veramendi and an anonymous referee for helpful comments. This project was supported by NSF grant SES-0241858, NIH grant R01-HD043411, a grant from the Geary Institute, University College Dublin, and a grant from the American Bar Foundation. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Heckman, James J. & Urzúa, Sergio, 2010. "Comparing IV with structural models: What simple IV can and cannot identify," Journal of Econometrics, Elsevier, vol. 156(1), pages 27-37, May. citation courtesy of