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Instrumental Variable Estimation: Weak IV

Instrumental Variable Estimation: Weak IV. Do smoking mothers put their babies at risk? Birthweight of child and whether and how much mother smoked during pregnancy Individual data, U.S., 1988 (National Health Interview Survey). Birth weight Smoking (packs per day). OLS.

dennis-hickman
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Instrumental Variable Estimation: Weak IV

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  1. Instrumental Variable Estimation: Weak IV Do smoking mothers put their babies at risk? Birthweight of child and whether and how much mother smoked during pregnancy Individual data, U.S., 1988 (National Health Interview Survey) Birth weight Smoking (packs per day)

  2. OLS log(bwght) = β0 + β1packs + u log(bwght) = β0 + β1packs + β2faminc + u

  3. IV (2SLS) log(bwght) = β0 + β1packs + β2faminc + u IV for packs: cigprice Corr(packs,cigprice) = 0.01

  4. Reduced form and 1st stage Reduced form: log(bwght) = γ0 + γ1cigprice + γ2faminc + v 1st stage: packs = δ0 + δ1cigprice + δ2faminc + w

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