Reconsidering the Effect of Family Size on Labour Supply: the Twin Problems of The Twin Birth Instrument

Abstract

SummaryWe consider two econometric problems when investigating the effect of family size on labour market outcomes using the popular twin birth instrument. The first is the potential for omitted variable bias caused by the fact that fertility treatments are linked to twin births and are typically unobserved. We present estimates that are corrected for this bias and find that it is comparatively small. Second, we show that the effects of twin-birth-induced variation in family size, as well as characteristics of the compliers, varies substantially with time passed since birth, which has consequences for the interpretation of estimates across samples and time.