The relationship between two alternative approaches, instrumental variables and control function procedures, for estimating the impact of endogenous treatment effects are examined. Although it is well known that the two approaches generate comparable estimates, the relationship between the estimators and their accompanying endogeneity tests appears not to be well understood. It is shown that the two procedures are closely related. The implications of the two procedures for the underlying economic sorting behavior are also examined.

Monte Carlo simulation, correlation analysis, econometrics, economic models, economic theory
ERIM Top-Core Articles
Journal of Business and Economic Statistics
Erasmus Research Institute of Management

Vella, F, & Verbeek, M.J.C.M. (1999). Estimating and Interpreting Models with Endogenous Treatment Effects. Journal of Business and Economic Statistics, 473–478. Retrieved from