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

Katrine Løken, Magne Mogstad and Matthew Wiswall ()

No 02/11, Working Papers in Economics from University of Bergen, Department of Economics

Abstract: This paper examines the causal relationship between family income and child out- comes. Motivated by theoretical predictions and OLS results suggesting a nonlinear relationship, we depart from previous studies in allowing the marginal e ects on children's outcomes of an increase in family income to vary across the income dis- tribution. Our nonlinear IV and xed-e ect estimates show an increasing, concave relationship between family income and children's outcomes. By decomposing the linear estimators, we show that the linear estimates miss the e ects of family in-come, because they assign little weight to the large marginal e ects in the lower part of the income distribution.

Keywords: family income; child development; nonlinearities; fixed effects estimation; instrumental variables estimation; linear models (search for similar items in EconPapers)
JEL-codes: C21 C23 J13 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2011-01-14
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Citations: View citations in EconPapers (4)

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http://ekstern.filer.uib.no/svf/2011/WP02.11.pdf Full text (application/pdf)

Related works:
Journal Article: What Linear Estimators Miss: The Effects of Family Income on Child Outcomes (2012)
Working Paper: What Linear Estimators Miss: Re-Examining the Effects of Family Income on Child Outcomes (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:bergec:2011_002

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