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Instrument selection: The case of teenage childbearing and women's educational attainment

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Author Info
D. Klepinger
S. Lundberg
R. Plotnick

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Abstract

Recent research has identified situations in which instrumental variables (IV) estimators are severely biased and has suggested diagnostic tests to identify such situations. We suggest a number of alternative techniques for choosing a set of instruments that satisfy these tests from a universe of a priori plausible candidates, and we apply them to a study of the effects of adolescent childbearing on the educational attainment of young women. We find that substantive results are sensitive to instrument choice, and make two recommendations to the practical researcher: First, it is prudent to begin with a large set of potential instruments, when possible, and pare it down through formal testing rather than to rely on a minimal instrument set justified on a priori grounds. Second, the application of more restrictive tests of instrument validity and relevance can yield results very different from those based on less restrictive tests that produce a more inclusive set of instruments, and is the preferred, conservative approach when improper instrument choice can lead to biased estimates.

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Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1077-95.

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Handle: RePEc:wop:wispod:1077-95

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-50, July. [Downloadable!] (restricted)
  2. Vella, Francis, 1993. "A Simple Estimator for Simultaneous Models with Censored Endogenous Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 441-57, May. [Downloadable!] (restricted)
  3. Ribar, David C., 1993. "A multinomial logit analysis of teenage fertility and high school completion," Economics of Education Review, Elsevier, vol. 12(2), pages 153-164, June. [Downloadable!] (restricted)
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  4. Nelson, Charles R & Startz, Richard, 1990. "The Distribution of the Instrumental Variables Estimator and Its t-Ratio When the Instrument Is a Poor One," Journal of Business, University of Chicago Press, vol. 63(1), pages S125-40, January. [Downloadable!] (restricted)
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  5. Ribar, David C, 1994. "Teenage Fertility and High School Completion," The Review of Economics and Statistics, MIT Press, vol. 76(3), pages 413-24, August. [Downloadable!] (restricted)
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  6. Paul Ruud, 1984. "Tests of specification in econometrics," Econometric Reviews, Taylor and Francis Journals, vol. 3(2), pages 211-242. [Downloadable!] (restricted)
  7. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  8. Alastair R. Hall & Glenn D. Rudebusch & David W. Wilcox, 1994. "Judging instrument relevance in instrumental variables estimation," Finance and Economics Discussion Series 94-3, Board of Governors of the Federal Reserve System (U.S.).
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  9. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May. [Downloadable!] (restricted)
  10. Nelson, C. & Startz, R., 1988. "Some Furthere Results On The Exact Small Sample Properties Of The Instrumental Variable Estimator," Discussion Papers in Economics at the University of Washington 88-06, Department of Economics at the University of Washington.
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  11. John Bound & David A. Jaeger & Regina Baker, 1993. "The Cure Can Be Worse than the Disease: A Cautionary Tale Regarding Instrumental Variables," NBER Technical Working Papers 0137, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. MacKinnon, James G, 1992. "Model Specification Tests and Artificial Regressions," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 102-46, March. [Downloadable!] (restricted)
  13. repec:att:wimass:199312 is not listed on IDEAS
  14. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November. [Downloadable!] (restricted)
  15. Mroz, Thomas A, 1987. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, Econometric Society, vol. 55(4), pages 765-99, July. [Downloadable!] (restricted)
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  16. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January. [Downloadable!] (restricted)
  17. Geronimus, Arline T & Korenman, Sanders, 1992. "The Socioeconomic Consequences of Teen Childbearing Reconsidered," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1187-214, November. [Downloadable!] (restricted)
  18. Klepinger, D. & Lundberg, S. & Plotnick, R., 1994. "Adolescent Fertility and the Education Attainment of Young Women," Discussion Papers in Economics at the University of Washington 94-5, Department of Economics at the University of Washington.
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  1. D. Klepinger & S. Lundberg & R. Plotnick, . "How Does Adolescent Fertility Affect the Human Capital and Wages of Young Women?," Institute for Research on Poverty Discussion Papers 1145-97, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
  2. Charles R. Nelson & Richard Startz & Eric Zivot, 1996. "Valid Confidence Intervals and Inference in the Presence of Weak Instruments," Econometrics 9612002, EconWPA. [Downloadable!]
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  3. Budría, Santiago & Pereira, Pedro Telhado, 2004. "On the Returns to Training in Portugal," IZA Discussion Papers 1429, Institute for the Study of Labor (IZA). [Downloadable!]
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