R1 (based on SW) How much does a woman's labor supply fall when she has an additional child?For this exercise you will need to download the data file fertility.Rda. The data are from the 1979 census and contain observations on more than 250,000 married women aged 21-35 with two or more children. The variables are: morekids =1 if mom had more than 2 children boylst =1 if lst child was a boy • boy2nd =1 if 2nd child was a boy samesex =1 if 1st two children same sex agem1age of mom at census black =1 if mom is black • hispan =1 if mom is Hispanic othrace =1 if mom is not black, Hispanic or white weeksml = mom's weeks worked in 1979 a) Regress weeks ml on more kids using OLS. On average, do women with more than two children work less than women with two children? How much less? b) Explain why the OLS regression you estimated is potentially subject to endogeneity bias. c) The data set contains the variable same sex, which is equal to 1 if the first two children are of the same sex and equal to zero otherwise. Are couples whose first two children of the same sex more likely to have a third child? Is the effect large? Is it statistically significant? d) Explain why same sex is a valid instrument for the instrumental variable regression of weeksml on more kids. e) Estimate the regression of weeksml on more kids using same sex as an instrument. How large is the effect of more kids on labor supply? f) Estimate the regression of weeks ml on more kids using same sex as an instrument,including age ml, black, his pan, and othrace in the labor supply regression (treating these variables as exogenous). Do the results change when you use these additional controls? Explain why or why not.

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