Understanding Returns to Birthweight

Worse future outcomes of infants with lower birthweight are widely documented, but the causal relationship remains controversial. Recent causal studies mostly rely on within-twin techniques, and tend to find significant effects of birthweight on long-term outcomes but substantially smaller effects on infant health compared to standard regression estimates. To advance the understanding of the causal effects of birthweight, we analyze rich population data of 1.7 million singleton newborns in Denmark since 1981 using a new instrument – the diagnosis of placenta previa, an obstetric complication that provides exogenous variation in birthweight. Studying an extensive range of outcomes, we find: (1) birthweight does have positive significant causal effects on child health and, in sharp contrast to earlier twin studies, their magnitudes are similar to or larger than standard regression estimates; (2) the effect of birthweight on general health diminishes as the child grows older (catch-up effect), although long-term effects on health exist; (3) the birthweight effect on infant health in Denmark has significantly diminished over the last three decades; and (4) a large part of the highly significant correlations between birthweight and non-health outcomes seem to be non-causal. We also replicate and discuss twin fixed-effects estimates. Our results provide the foundation for policies that target birthweight: returns to birthweight can be substantial, but they depend on the standard of medical care available.