Understanding Instrumental Variables in Models with Essential Heterogeneity
J. Heckman, Sergio Urzua, and E. Vytlacil ,
3
( 88 )
Review of Economics and Statistics
389-432
August
2006
Abstract

This paper examines the properties of instrumental variables (IV) applied to models with essential heterogeneity, that is, models where responses to interventions are heterogeneous and agents adopt treatments (participate in programs) with at least partial knowledge of their idiosyncratic response. We analyze two-outcome and multiple-outcome models, including ordered and unordered choice models. We allow for transitionspecific and general instruments. We generalize previous analyses by developing weights for treatment effects for general instruments.

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