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

J Econom. 2010 May 1;156(1):27-37. doi: 10.1016/j.jeconom.2009.09.006.


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.