What Linear Estimators Miss: The Effects of Family Income on Child Outcomes

Katrine Løken, Magne Mogstad and Matthew Wiswall ()

American Economic Journal: Applied Economics, 2012, vol. 4, issue 2, 1-35

Abstract: We assess the implications of nonlinearity for IV and FE estimation when the estimated model is inappropriately assumed to be linear. Our application is the causal link between family income and child outcomes. Our nonlinear IV and FE estimates show an increasing, concave relationship between family income and children's outcomes. We find that the linear estimators miss the significant effects of family income because they assign little weight to the large marginal effects in the lower part of the income distribution. We also show that the linear IV and FE estimates differ primarily because of different weighting of marginal effects. (JEL C26, D14, J12, J13)

JEL-codes: C26 D14 J12 J13 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/app.4.2.1
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Citations: View citations in EconPapers (164)

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Working Paper: What Linear Estimators Miss: The E ects of Family Income on Child Outcomes (2011)
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