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Unformatted text preview: Data with Spatial Characteristics Standard Economic Models Question: Do AFDC payments improve infant health? Data: cross section of children within one region (no regional variation to begin) y i- birth weight of child i x i- corresponding mother&s education and age afdc i- 1 ( mother of i receives AFDC payments ) y i = & + x i & 1 + afdc i & & 2 + u i AFDC payment is a treatment issue - treatment not randomly assigned (mother&s with better pregnancy health knowledge are more likely to en- roll in AFDC) AFDC Study: Endogeneity y i = & + x i & 1 + afdc i & & 2 + u i endogenous treatment - Cov ( afdc i ;u i ) 6 = 0 solution: instrument - aspect of AFDC that varies over regions (states) - need to gather data across states y is ;x is ;afdc is- corresponding measures for child i in state s z s- AFDC bene&t level in state s 1st Stage: afdc is = ¡ + x is ¡ 1 + ¡ 2 z s + ¢ is Instrument validity correlated with afdc - check with ^ ¡ 2 uncorrelated with u is must be excludable - mothers (at...
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This note was uploaded on 12/26/2011 for the course ECON 245a taught by Professor Staff during the Fall '08 term at UCSB.
- Fall '08