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

• 成果类型: Article
• 署名作者: Loken, Katrine V.; Mogstad, Magne; Wiswall, Matthew
• 署名单位: University of Bergen; University of London; University College London; New York University
• 刊物名称: AMERICAN ECONOMIC JOURNAL-APPLIED ECONOMICS
• ISSN/ISSBN: 1945-7782
• DOI: 10.1257/app.4.2.1
• 发表日期: 2012
• 页码: 1-35
• 关键词: intelligence; EQUATIONS; height; models

摘要

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)