TY  - RPRT
        AU  - Heckman, James J.
AU  - Urzua, Sergio
AU  - Vytlacil, Edward
        TI  - Understanding Instrumental Variables in Models with Essential Heterogeneity
        PY  - 2006/Sep/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 2320
        UR  - https://www.iza.org/publications/dp2320
        AB  - 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 transition-specific and general instruments. We generalize previous analyses by developing weights for treatment effects for general instruments. We develop a simple test for the presence of essential heterogeneity. We note the asymmetry of the model of essential heterogeneity: outcomes of choices are heterogeneous in a general way; choices are not. When both choices and outcomes are permitted to be symmetrically heterogeneous, the method of IV breaks down for estimating treatment parameters. 
        KW  - unobserved heterogeneity
KW  - instrumental variables
KW  - treatment parameters
KW  - policy evaluation
        ER  -