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Angrist and Krueger (1991) attempt to overcome ability bias by exploiting the quarter of birth and compulsory schooling laws.
(a) Under what assumptions is the quarter of birth (i.e., a dummy variable for being born in J anuary-March of a year) a legitimate instrumental variable for education in an earnings equation?
(b) Who are the compliers in this study? (Hint: Recall that compliers are the subpopulation who are induced to change their behavior because of an intervention or natural experiment.)
(c) Suppose the government is considering adjusting university tuition fees according to the economic returns to education. You are asked to review studies in economics literature and come up with a reasonable estimate of the economic return to an additional year of college education. Will you use Angrist and Krueger (1991) for this task and why?
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