Use of Instrumental Variables in the Presence of Heterogeneity and Self-Selection: An Application in Breast Cancer Patients
A. Basu, J. Heckman, S. Navarro, and Sergio Urzua ,
( 16 )
Health Economics

Instrumental variable (IV) methods are widely used in the health economics literature to adjust for hidden selection biases in observational studies when estimating treatment effects. Less attention has been paid in the applied literature to the proper use of IVs if treatment effects are heterogeneous across subjects and individuals select treatments based on expected idiosyncratic gains or losses from treatments. In this paper we compare conventional IV analysis with alternative approaches that use IVs to estimate treatment effects in models with response heterogeneity and self-selection.

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