Causal Diagram and Identification Methods for Private School Effect on Wages
Verified
Added on 2023/04/20
|3
|863
|228
AI Summary
This article discusses the causal diagram for the effect of private school on wages and explores identification methods such as the back-door method, exclusion restriction/instrumental variable method, and front-door method.
Contribute Materials
Your contribution can guide someone’s learning journey. Share your
documents today.
Just a couple notes: 1) "exclusion restriction" is just another way of saying "instrumental variable" 2) I forgot that I included the first stage/second stage terminology in part c; we didn't cover that. "First stage" here means "the effect of the instrument on the treatment", i.e. do you need to control for anything to eliminate back doors for that relationship, and "Second stage" means "the effect of the treatment on the outcome, using the instrument" Homework 3 1)Given the following variable and assumed causal relations: Adult wages [label this Wage] Going to college (affects adult wages) [label College] Attending a private or public high school (affects wages and whether you go to college) [label Private] Family income (affects wages, college-going, and attending a private or public high school) label [label SES] Living near a private high school (affects wages and whether you attend a public or private high school, is correlated with family income) [label Location] Religious affiliation (affects whether you attend a public or private high school) [label Religion] a)Draw a causal diagram incorporating all the above variables and effects. You may want to usehttp://dagitty.net/dags.htmlto draw. Sales Adult wageGoing to college attending a private or public schoolFamily income Living near a private high schoolReligion affiliation
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
b)Assume that the causal diagram as you drew it is true. What variables would you condition on (control for) if you wanted to identify the effect of Private on Wage using the “back-door method”? Don’t include any unnecessary controls. i)Religious affiliation. ii)Living near a private high school. c)Assume that the causal diagram as you drew it is true. How would you go about identifying the effect of Private on Wage using an exclusion restriction / instrumental variable? What control variables would you include in the first stage, if any? What control variables would you include in the second stage, if any? Explain why this method works and what it’s doing. This can be done by calculating the coefficient o time. The coefficient will determine the importance of the father. The method was successful since the factor is covered. d)Assume that the causal diagram as you drew it is true. How would you go about identifying the effect of Private on Wage using the “front-door method”? Is this possible in this diagram? Don’t include any unnecessary controls. The value obtained should be large than 1 to indicate development and growth why not together. From the diagram, this is 100% possible. e)So far we’ve assumed that the causal diagram as you drew it is true. But thinking about the education system in the United States, what assumptions in the diagram are likely to be untrue? List at least one, although there are at least three big problems. All the factors written are independent. An increase or decrease in wages is equally divided among the factors. f)Go back to assuming the causal diagram as you drew it is true. What kind of effect will the exclusion restriction / instrumental variable method give you? In other words, you’re estimating the average effectamong what group? The estimate is made on the group currently on monthly wages. Their wage is evaluated as per the factors outlined. g)You see a study that makes a good case that this exact causal diagram should hold in the particular region sampled for the author’s data set. However, looking at the sample statistics, you note that this particular region is much wealthier than other regions. The author runs either a back-door or IV method to estimate the effect of Private on Wage, finding in both cases that going to a private school raises wages by 10%. The author then argues that this 10% estimate means that the government should enact a policy encouraging many more people to go to private school. Even assuming that the causal diagram does apply in the author’s sample, what further assumption is the author’s advocacy making about the effect of Private on Wages? Is that assumption likely to be true? What will happen if the policy is enacted but the assumption isn’t true? Assumption: No deductions are made on the wages received. This assumption is not true.
The wage obtained if the policy is upheld will provide malicious results making them unreliable.