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The Roy Model

The Roy model is the workhorse for thinking about selection on unobserved gains: agents choose treatment when it pays off for them, which breaks the random-assignment intuition and forces us to take marginal treatment effects, control functions, and extrapolation seriously. This week ties together Heckman–Vytlacil’s MTE framework, the Mogstad–Santos–Torgovitsky bounding approach, and a graphical intuition you can keep returning to.

Applied Microeconomics
In-class exercise
Applied Microeconomics
Learning objectives