Econ assignment

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Econ assignment

Format Other
Volume of 2 pages (550 words)
Assignment type : Coursework

Description
Problem 1

Migration plays an important role in development and as a strategy for poverty reduction. Burkina Faso, whose conditions for agriculture are far from favorable, has a long history of migratory movement, and migration within West Africa has long taken place in response to drought and low agricultural productivity. In recent decades, migration to destinations outside the African continent and in particular to Western Europe has become more important for migrants from Burkina Faso.

Migration affects the household in three ways:
1. When a household member migrates, the household loses labor.
2. Migration often results in remittances.
3. Migration implies a reduction in household size for consumption.

A critical question is what happens to the welfare of rural households when they engage in migration. When households lose labor, it may be harder for them to participate in and generate income from other activities such as agriculture. Remittances may partly compensate for these negative effects. In addition, a reduction in household size means less consumption pressure on the household.

BEN, a famous theoretical economist, is trying to estimate the causal impact of migration on household income. Ben took a random sample of 1,000 households where a household member has migrated and another random sample of 1,000 households where no household member has migrated.

In Ben’s final report he estimates the naive Average Treatment Effect of the program by subtracting the average income of the 1,000 households where no one migrated from the average income of the 1,000 households where someone migrated.

For the rest of this question, use the Table 1 below.

??=0 ??=1
?(Y0? |?? ) 30,000 CFA 40,000 CFA
?(Y1? |?? ) 33,000 CFA 45,000 CFA

Remember that

1. What is Ben’s estimate of the naive Average Treatment Effect (ATE)?

2. What is the true causal impact of migrating on household income?

3. How large is the selection bias?

Problem 2

The following two countries have the same average income per capita, , equal to $3.50 USD dollars (PPP) per day. The poverty line is also z=$3.50 USD Dollars (PPP) per day.

Please complete the following tables and express the FGT measures as percentages with two decimal spaces.

Country A
Person # y Poor
(Yes=1 No=0) Poor*
(z-y)
(only if poor) Poor*
(z-y)2
(only if poor)
1 $1
2 $2
3 $3
4 $4
5 $5
6 $6
Total

Problem 1

Migration plays an important role in development and as a strategy for poverty reduction. Burkina Faso, whose conditions for agriculture are far from favorable, has a long history of migratory movement, and migration within West Africa has long taken place in response to drought and low agricultural productivity. In recent decades, migration to destinations outside the African continent and in particular to Western Europe has become more important for migrants from Burkina Faso.

Migration affects the household in three ways:
1. When a household member migrates, the household loses labor.
2. Migration often results in remittances.
3. Migration implies a reduction in household size for consumption.

A critical question is what happens to the welfare of rural households when they engage in migration. When households lose labor, it may be harder for them to participate in and generate income from other activities such as agriculture. Remittances may partly compensate for these negative effects. In addition, a reduction in household size means less consumption pressure on the household.

BEN, a famous theoretical economist, is trying to estimate the causal impact of migration on household income. Ben took a random sample of 1,000 households where a household member has migrated and another random sample of 1,000 households where no household member has migrated.

In Ben’s final report he estimates the naive Average Treatment Effect of the program by subtracting the average income of the 1,000 households where no one migrated from the average income of the 1,000 households where someone migrated.

For the rest of this question, use the Table 1 below.

Remember that
ATE^Naive=E[Y_1i ├|D_i=1┤]-E[Y_0i ├|D_i=1┤]+E[Y_0i ├|D_i=1┤]-E[Y_0i ├|D_i=0┤]
= ATE^TRUE +Selection Bias

What is Ben’s estimate of the naive Average Treatment Effect (ATE)?

What is the true causal impact of migrating on household income?

How large is the selection bias?

Problem 2

The following two countries have the same average income per capita, y ̅, equal to $3.50 USD dollars (PPP) per day. The poverty line is also z=$3.50 USD Dollars (PPP) per day.

Please complete the following tables and express the FGT measures as percentages with two decimal spaces.
FGT_α=1/(Nz^α ) ∑_(i=1)^q▒(z-y_i )^α

Problem 3
The KwaZulu-Natal province is located on the Indian Ocean coast of South Africa and is home to approximately 20% of South Africa’s population. The KwaZulu-Natal Income Dynamics Study (KIDS) surveyed a random sample of households in 1993. These same households were surveyed again in 1998 and 2004. The advantage of this type of panel (or longitudinal) data is that it permits us to explore poverty and income distribution dynamics as we can see which households get ahead over time and which fall behind. The rest of this problem set asks you to use the KIDS data to calculate basic measures of income distribution and poverty and to explore the importance of assets in determining the level of expenditures.
The excel spreadsheet PS1_KIDS.xls is the KIDS data we use for this part. Use the worksheet “Per Capita Expenditures” which contains columns representing monthly per-capita expenditures (in Rand, the South African currency) for each KIDS household for the years 1993, 1998 and 2004. These expenditure figures have been adjusted to the year 2000 South African price level, and they capture the value of all household expenditures, including the value of purchased goods and services as well as home-produced foods, the rental value of owner-occupied (or squatter) housing, etc. The data set includes information on the approximately 500 households that provided complete information in each of the three years.

Fill in the table below, where y ̅ denotes the sample mean of monthly per-capita expenditures; S^2 is the sample variance; Var(y ̅) is the variance of the sample mean; and SE(y ̅) is the standard error of the sample mean.

The national poverty line in South Africa in terms of monthly per-capita expenditures is 322 Rand. Calculate and report in Table 2 the various poverty indices for 1993, 1998 and 2004:

Because it is longitudinal, the KIDS data set permits us to see whether or not poverty is characterized by a lot of churning (i.e., initially poor people tend to escape poverty while their places are taken by initially non-poor people who fall temporarily into poverty), or whether a large element of poverty is chronic (i.e., the same people are poor period after period).

Using the KIDS data, calculate the fraction of households that were…
…poor in all three periods (chronically poor):
…poor in only one period (transitory poor):

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