final_1

# final_1 - ECON 139 Duke University Spring 2007 Final...

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ECON 139 Duke University Spring 2007 Final Instructions (PLEASE READ CAREFULLY before starting): This test has a total of 4 problems and 102 points . You have 120 minute Remember to Show Your Work and please be sure that your handwriting is legible ! Be precise but brief. If a correct reply is hidden among wrong, or irrelevant, arguments, you will not get full credit. We will grade only what is written on your exam sheet. There should be plenty of space for all your calculations. There are two extra pages included at the end of the exam to be used as scratch paper. Do not turn in anything besides your exam sheet . Standard errors are in parentheses (unless otherwise noted). Name: 1

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1. (31 points total) to work (i.e. how fertility impacts labor supply). Speci±cally, you want to know whether (and by how 1980 U.S. Census on 250,000 married women aged 21-35 with two or more children . Your dataset contains the following variables: weeks - total weeks the woman worked in 1979 morekids - dummy equal to 1 if the woman has three or more kids age - age of the woman samesex - dummy equal to 1 if the two oldest children are of the same sex (i.e. boy-boy or girl-girl) a. (4 points) A simple OLS regression of weeks on morekids yields the following output weeks = 21 : 07 ( : 056) ± 5 : 39 ( : 087) morekids On average, do women with more than two children work less than women with two children? How much less? Is the di/erence statistically signi±cant at the 1% level? b. (4 points) Is there a good reason to think that OLS is an inappropriate technique for estimating the causal e/ect of fertility ( morekids ) on labor supply ( weeks )? Explain why or why not. 2
by the gender of the ±rst two children. To examine this issue, you regress the variable morekids on samesex (using a LPM), yielding the following results morekids = : 346 ( : 001) + : 068 ( : 002) samesex Are couples whose ±rst two children are of the same sex more likely to have a third child? Is the e/ect large? Is it statistically signi±cant at the 1% level? d. (4 points) Do you think samesex is a valid instrument for an IV regression of weeks on morekids ? Why or why not? Is

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final_1 - ECON 139 Duke University Spring 2007 Final...

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