Causal Inference for Policy Evaluation – HS 2022

Conny Wunsch, Ulrike Unterhofer and Véra Zabrodina

Lab Assignment 3

Due: 9 November 2022, 23:59.

Questions

Instrumental Variables

1. Estimate the effects of fertility on female labour supply based on the second instru-
ment that is proposed by Angrist and Evans (1998): twinning at second birth. Base
yourself on the data set AngristEvans1980 restricted sample.RData for which you
do not need to impose any additional sample restrictions. It is a sample of women
aged 21 to 35 who were older than 15 at their first birth, and have at least two
children with the second child being older than one.

(a) Compute the age of thirdborn children in years and compare the average age
of these children for twin and singleton births. Account for the fact that in
households with only two children the age of the third child is coded as zero.
What do you observe? (1 point)

(b) Provide a point estimate for the nonparametric LATE of fertility on the women’s
hours worked per week (hourswm) based on the twin instrument. Interpret the
LATE estimate. (2 points)

(c) Program a bootstrap function manually and run it with 99 replications and
obtain standard errors for the estimated LATE. Is the estimated effect statis-
tically significant? (2 points)

(d) The LATE on hours worked based on the instrument samesex amounts to
−4.4 hours in this sample. Discuss potential reasons behind the differences in
results based on the two different instruments, keeping the local nature of the
estimated effect in mind. (3 points)

(e) Are women older than the median age at first birth overrepresented among the
compliers when the instrument is twins? Conduct a suitable check and shortly
interpret the results. (3 points)

1
 2. Independent of the instrument used, Angrist and Evans (1998) find no economically
and statistically significant effect on male labour supply. Discuss possible reasons
behind this result keeping the imposed sample restrictions in mind. (3 points).

Regression discontinuity design

5. Reading for the next lab session: Meyersson (2014). You may skip section 6 in the
paper.

(a) What is the running variable, the treatment, and how is the treatment as-
signed? (3 points)

(b) Why would comparing the average educational outcomes in municipalities with
and without Islamic rule result in a biased estimate of the treatment effect?
Shortly discuss, in your own words, what the endogeneity problem is in this
context. (3 points)

Submission: Please send your written solutions as well as any code used to generate the
answers to ulrike.unterhofer@unibas.ch. The written answers including outputs such
as tables and graphs should be saved as a PDF file, and are limited to a maximum of 2
pages (12 points, single spacing). Any text beyond that will not be considered.

Please refer to the Lab sessions’ syllabus for further details.