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How Much Should We Trust Linear Instrumental Variables Estimators? An Application to Family Size and Children's Education

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  • Mogstad, Magne

    ()
    (University of Chicago)

  • Wiswall, Matthew

    ()
    (Arizona State University)

Abstract

Many empirical studies specify outcomes as a linear function of endogenous regressors when conducting instrumental variable (IV) estimation. We show that tests for treatment effects, selection bias, and treatment effect heterogeneity are biased if the true relationship is non-linear. These results motivate a re-examination of recent evidence suggesting no causal effect of family size on children's education. Following common practice, a linear IV estimator has been used, assuming constant marginal effects of additional children across family sizes. We find that the conclusion of no effect of family size is an artifact of the linear specification, which masks substantial marginal family size effects.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4562.

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Length: 56 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4562

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Related research

Keywords: instrumental variables; variable treatment intensity; treatment effect heterogeneity; selection bias; quantity-quality; family size; child outcome;

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Cited by:
  1. Aaberge, Rolf & Mogstad, Magne & Peragine, Vito, 2010. "Measuring Long-Term Inequality of Opportunity," IZA Discussion Papers 4714, Institute for the Study of Labor (IZA).
  2. Loken, Katrine Vellesen & Mogstad, Magne & Wiswall, Matthew, 2010. "What Linear Estimators Miss: Re-Examining the Effects of Family Income on Child Outcomes," IZA Discussion Papers 4971, Institute for the Study of Labor (IZA).
  3. Mogstad, M. & Wiswall, M., 2012. "Instrumental variables estimation with partially missing instruments," Economics Letters, Elsevier, vol. 114(2), pages 186-189.
  4. Parfait Eloundou-Enyegue & Sarah Giroux, 2012. "Fertility Transitions and Schooling: From Micro- to Macro-Level Associations," Demography, Springer, vol. 49(4), pages 1407-1432, November.
  5. Román David Zárate, 2013. "Family size and children quality: New evidence and new exogenous shocks in the case of Colombian Households," DOCUMENTOS CEDE 010588, UNIVERSIDAD DE LOS ANDES-CEDE.

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