Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2003:4: Using matching, instrumental variables and control functions to estimate economic choice models

James Heckman and Salvador Navarro-Lozano ()
Additional contact information
James Heckman: The University of Chicago, Department of Economics, Postal: 1126 East 59th Street, Chicago, IL 60637
Salvador Navarro-Lozano: The University of Chicago, Department of Economics, Postal: 1126 East 59th Street, Chicago, IL 60637

Abstract: This paper investigates four topics. (1) It examines the different roles played by the propensity score (probabilitiy of selection) in matching, instrumental variable and control functions methods. (2) It contrasts the roles of exclusion restrictions in matching and selection models. (3) It characterizes the sensivity of matching to the choice of conditioning variables and demonstrates the greater robustness of control function methods to misspecification of the conditioning variables. (4) It demonstrates the problem of choosing the conditioning variables in matching and the failure of conventional model selection criteria when candidate conditioning variables are not exogenous.

Keywords: Propensity score; matching; selection models

JEL-codes: C31

46 pages, January 16, 2003

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