How does fertility affect labor supply? That is, how much does a woman's labor supply fall when she has an additional child? In this question, you will estimate this effect using data for married woman from the 1980 U.S. Census.

The data is available in the file Fertility.gdt and described in the file Fertility_Description. The data set contains information on married women aged 21 - 35 with two or more children.

These data were provided by Prof Williams Evans of the University of Maryland and were used in his paper with Joshua Angrist "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," American Economic Review, 1998, 88(3); 450 - 477

a)Regressweeksm1on the indicator variablemorekids, 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 estimated in part(a) is inappropriate for estimating the causal effect of fertility (morekids) on labor supply (weeksm1)

c)The data set contains the variablesamesex, which is equal to 1 if the first two children are of the same sex (boy - boy or girl -girl) and equal to 0 otherwise. Are couples whose first two children are of the same sex more likely to have a third child? Is the effect large? Is it statistically significant?

d)Explain whysamesexis a valid instrument for the IV regression ofweeksm1onmorekids

e)Estimate the IV regression ofweeksm1onmorekids, usingsamesexas an instrument. How large is the fertility effect on labor supply?

Do the results change when you include the variablesagem1,black,hispan, andothracein the labor supply regression (treating these variables as exogenous)? Explain why or why not

Please use Gretl and provide detailed explaination.