Research has shown that birth weight has a lasting impact on later-life outcomes such as educational attainment and earnings. This paper examines the role of health at birth in determining academic achievement in childhood, which may provide the link between birth weight and adult outcomes. Using three waves of the Child Development Supplement of the Panel Study of Income Dynamics data over 1997-2007, we build on the literature by employing the fetal growth rate as a proxy for net nutritional intake in utero and propose a nested error-component two-stage least squares estimator that draws on internal instruments from alternative dimensions of the multilevel panel data set. In particular, this alternative estimator allows us to exploit the information on children with no siblings in the sample, which comprise over 40% of the observations in our sample, as well as to obtain coefficient estimates for the time-invariant variables such as race and maternal education. This would not be feasible with the usual mother fixed effects estimation. We obtain modest but significant effects of both birth weight and the fetal growth rate on math and reading scores, with the effects concentrated in the low birth weight range. Infant health measures appear to explain little of the well-documented racial disparity in test scores.
Keywords: PSID-CDS; hierarchical panel data; mother fixed effects; mother's education; nested error component 2SLS; racial disparity.
Copyright © 2014 John Wiley & Sons, Ltd.