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date: 20 October 2021

Abstract and Keywords

This chapter describes strengths and limitations of three twins methods developed in economics: control for unobserved genetic and family background endowments using monozygotic (MZ) twins fixed effects (FE) to estimate e.g. impacts of schooling on wages, health, and other outcomes; estimation of key parameters in intrafamilial models of investment in children using MZ and dizygotic (DZ) twins; and investigation of familial responses to fertility shocks within the quantity-quality fertility model using MZs and DZs. It also describes strengths and limitations of a fourth twins method used most widely outside of economics: variance decomposition of phenotypes into genetic and environmental components to obtain heritability estimates with additive genetics, common environment and unique environment (ACE) models using MZs and DZs. The chapter concludes that the first three twins methods remain valuable for learning about important empirical parameters in economics despite development of genetic sequencing. The fourth method is less useful in economics.

Keywords: monozygotic/identical twins, dizygotic/fraternal twins, fixed-effects estimates, endowments, intrafamilial allocations, investments in children, schooling determinants and impacts, ACE models, heritability, quantity-quality fertility model

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