Table 4 Dealing with time-variant regressors: Two stage residual inclusion (2SRI) estimation marginal effects

EDUCATION

Years of education

−0.054

−0.017

0.022

0.049

(0.035)

(0.034)

(0.023)

(0.038)

First stage residuals

0.037

0.020

−0.017

−0.040

(0.037)

(0.037)

(0.024)

(0.041)

Instruments

1) mother’s years of education; 2) father’s years of education

Instrument relevance

1^st stage coefficients: mother’s education 0.167***, father’s education 0.137**

R² of excluded instruments 0.082; F-stat 22.22***

Instrument exogeneity

LR test 0.552

LOCAL UNEMPLOYMENT RATE

Unemployment rate in 2007

−0.001

0.007

−0.051***

0.045***

(0.020)

(0.016)

(0.012)

(0.016)

First stage residuals

−0.047**

−0.006

0.081***

−0.028

(0.024)

(0.022)

(0.020)

(0.029)

Instruments

1) unemployment rate in 1997; 2) distance (km) to the capital Riga

Instrument relevance

1^st stage coefficients: unemployment rate in 1997 0.481***, distance to Riga 0.008*; R² of excluded instruments 0.572; F-stat 69.56***

Instrument exogeneity

LR test 0.831

Unemployment rate 1997 (MNP)

0.002

0.006

−0.032***

0.024***

(0.009)

(0.008)

(0.007)

(0.009)

LOCAL SHARE OF NON-CITIZENS

Share of non-citizens 2007

−0.002

−0.003

0.017***

−0.012*

(0.006)

(0.006)

(0.006)

(0.007)

First stage residuals

0.002

0.019

0.001

−0.022

(0.014)

(0.013)

(0.015)

(0.018)

Instruments

1) share of non-citizens in 1997; 2) number of major factories in 1970

Instrument relevance

1^st stage coefficients: share of non-citizens in 1997 0.490***, major factories in 1972 0.835***; R² of excluded instruments 0.762; F-stat 678.81***

Instrument exogeneity

LR test 0.124

Share of non-citizens 1997 (MNP)

−0.002

−0.001

0.010***

−0.007*

(0.003)

(0.003)

(0.003)

(0.004)