What is the probability of having a third child for parents whose first two children are the same… 1 answer below »

Question 1

What is the probability of having a third child for parents whose first two children are

the same gender? What about for parents whose first two children are of different genders?

Describe why this provides a ‘first-stage’ for the instrument.

Question 2

Estimate the ‘first-stage’ and ‘second-stage’ of the instrumental variable regression using

“same gender for first two kids” as the instrument without any additional controls. Interpret

the point estimate for both the ‘first-stage’ and ‘second-stage’.

Question 3

Run the instrumental variable regression without any controls. Interpret the resulting

point estimate and clearly describe which type of individuals is identifying the ‘LATE’.

Question 4

Discuss the (internal) validity of the instrument. In addition, state who exactly a defier

would be in this example and whether the “no defier” (or monotonicity) assumption is likely

to hold.

Question 5

Now run the IV regression with the following controls: race, age of the mother, age of

the mother squared, age of the mother at first birth, age of the mother at first birth squared.

Does the point estimate change relative to question 3? Is this reassuring in terms of (internal)

validity? Describe why or why not.

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