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Identification Problems in Economic Model Construction

Tjalling C. Koopmans

Abstract

Statistical inference, from observations to economic behavior parameters, can be made in two steps:inference from the observations to the parameters of the assumed joint distribution of the observations, and inference from that distribution to the parameters of the structural equations describing economic behavior. The latter problem of inference, described by the term "identification problem," is discussed in this article in an expository manner, drawing on other more original work for concepts and theorems, using a number of examples drawn partly from econometric literature.