Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 02/11: What Linear Estimators Miss: The E ects of Family Income on Child Outcomes

Katrine Vellesen Løken (), Magne Mogstad () and Matthew Wiswall ()
Additional contact information
Katrine Vellesen Løken: University of Bergen, Postal: Department of Economics, Fosswinckelsgate 14, 5007 Bergen, Norway
Magne Mogstad: Statistics Norway, Postal: Statistics, Postboks 8131 Dep, 0033 Oslo, Norway
Matthew Wiswall: New York University, Postal: Economics Department , Department of Economics, New York University , 19 W. 4th Street, 6FL , New York, NY 10012 ,

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

JEL-codes: C21; C23; J13

53 pages, January 14, 2011

Full text files 

WP02.11.pdf PDF-file Full text

Download statistics

Questions (including download problems) about the papers in this series should be directed to Kjell Erik Lommerud ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:bergec:2011_002This page generated on 2024-10-27 22:37:47.