Increasing the credibility of the twin birth instrument

Helmut Farbmacher,Raphael Guber,Johan Vikström

doi:10.1002/jae.2616

Abstract

SummaryTwin births are an important instrument for the endogenous fertility decision. However, twin births are not exogenous either as dizygotic twinning is correlated with maternal characteristics. Following the medical literature, we assume that monozygotic twins are exogenous, and construct a new instrument, which corrects for the selection although monozygotic twinning is usually unobserved in survey and administrative datasets. Using administrative data from Sweden, we show that the usual twin instrument is related to observed and unobserved determinants of economic outcomes, while our new instrument is not. In our applications we find that the classical twin instrument underestimates the negative effect of fertility on labor income. This finding is in line with the observation that high earners are more likely to delay childbearing and hence have a higher risk to get dizygotic twins.

Highlights

As fertility decisions are endogenous, most papers on how family size affects maternal and child outcomes use instrumental variable techniques
We propose a new instrument based on monozygotic twin births which corrects for the non-randomness of twin births
Braakmann & Wildman (2014) show that instrumental variables estimates with and without information on fertility treatments might differ substantially in applications to female labor supply and the child quantity–quality relation.4. This suggests that mothers with twins have become an increasingly selective sample, which poses a threat to the identification of causal effects using the classical twin instrument

Summary

Introduction

As fertility decisions are endogenous, most papers on how family size affects maternal and child outcomes use instrumental variable techniques. About pre-pregnancy labor force participation, labor income, and hospitalizations, and conclude that these pre-pregnancy outcomes predict future twin births This selection is likely to be even more pronounced in data from the US, where twin rates are almost twice as high as those in Sweden. Braakmann & Wildman (2014) show that instrumental variables estimates with and without information on fertility treatments might differ substantially in applications to female labor supply and the child quantity–quality relation.4 This suggests that mothers with twins have become an increasingly selective sample, which poses a threat to the identification of causal effects using the classical twin instrument. Our pre-pregnancy outcomes are labor force participation, yearly labor income, and hospitalizations two years before the first birth.7 At this point in time, the future mothers have no children.

Learning from monozygotic twins

Empirical applications

Findings

Conclusions