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Question on Instrumental Variables. Variables: Samesex - first two kids of the same sex - (is...

Question on Instrumental Variables.

Variables:

Samesex - first two kids of the same sex - (is 0 if the gender is boy and girl but 1 if gender is boy and boy or girl and girl)

Kids - number of kids

Is the variable samesex an instrumental variable for kids. Explain in the econometric terms of relevance and validity

Math   Statistics-And-Probability   
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Answer #1

Yes, the variable same-sex is an instrumental variable.

Explanation: We know that the instrumental variable is the 3rd variable in regression analysis when we have an endogenous variable. Here, we have variable kids which is defined as the number of kids. The same-sex variable is 0 when the gender of first two kids is different that is 1 boy and 1 girl & the same-sex variable is 1 when the gender of first two kids is same i.e either they are a boy or wither they are a girl. So, here kids variable can be treated as endogenous variable & same-sex is an instrumental variable.

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