Family, Friend, or Foe? Essays in Empirical Microeconomics

Abstract: This thesis consists of four studies that deal with how individual outcomes are shaped by social interactions. The scope of the thesis ranges from relationships between individuals in what is arguably the most fundamental building block in society today — the family — to more generalized relationships between different groups in society. The first study examines whether twins’ inferior health at birth matters when twinning is used to identify the causal effect of family size on child outcomes. We use twin zygosity to vary twin’s health at birth. The motivation for this is that monozygotic (identical) twins have been found to be of lower health at birth than dizygotic (fraternal) twins are, along the same dimensions that separate twins from singletons. We find that zygosity matters for the twin instrumental variable estimate of the effect of family size on earnings. This suggests that parents do respond to twins’ birth endowment in a way that can mask any negative effect of family size on child outcomes that may exist. The second study examines the importance of family size on child health. We model child health as a special type of human capital that is the result of both parental investment and environmental factors. Family size, therefore, affects child health via two mechanisms. First, family size has a negative effect on child health via a dilution effect of parental resources. Second, family size has a positive effect on the development of the immune system due to increased exposure to pathogens, bacteria, parasites, and viruses at a young age. We find that family size has a positive effect on health and that the effect is larger if family formation is relatively fast. This speaks in favor of the idea that early exposure to pathogens, bacteria, parasites, and viruses is an important input in the health production function. The third study exploits the 1996 divorce law reform in Ireland to examine the effect of changes in the divorce law that make it easier to divorce on the general well-being of spouses. I find that allowing people to get divorced increased the well-being of both women and men, and it increased the well-being of women the most. The results suggest that the divorce reform led to an anticipatory behavior by both spouses that increased their well-being. The results also suggest that the reform led to a shift in the within-household bargaining power toward the wife and made it possible for her to leave a bad marriage, which further increased women’s well-being. The fourth study examines the effect of media visibility of people of color on social tolerance toward people due to their race. Using US state-level data, I find that an increase in the number of hours of media visibility of people of color leads to a fall in the rate of hate crimes motivated by race the following year. The results suggest that an increase in media visibility of minority groups can be an important tool to increase social tolerance and reduce any potential conflicts that may arise between different groups in society.