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Development Economics Exam: Inequality, Technology, Ethnic Divisions, Education Questions, Exams of Economics

A development economics exam consisting of four long questions and four short questions. The long questions require a more sustained argument and are worth 30 points each, while the short questions are worth 10 points each. Topics covered include insurance and inequality, technology adoption, ethnic and social divisions, and education. Students are expected to answer three of the long questions and all four short questions.

Typology: Exams

2011/2012

Uploaded on 12/04/2012

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Development Field Exam
January 12, 2011
This exam has two parts: A section of four long questions and a section of four short
questions. You should answer only three of the four longer questions. However, please answer
all four short questions.
Longer Questions
Complete three of these longer questions. Each is worth 30 points. These may require a
more sustained argument than the short questions, but clarity and concision are still very
desirable. We would prefer that you do not use a blue book, but instead use letter-sized
notepaper, written on one side. Please also begin each long question you complete on a new
sheet of paper.
1. Insurance and Inequality Consider a village of nfarmers who live over Tperiods.
Each person has a time-separable von Neumann-Morgenstern utility function, and
derives utility from consumption. Each farmer iharvests a quantity of the consumption
good ei {1,2}in every period, with the probability of a good harvest varying by
person (but not over time), so that Pr(ei= 2) = πi.
(a) Supposing that n= 2, sketch a state-date tree for the economy described above.
(b) Relaxing the assumption that n= 2, assume that the momentary utility func-
tions of farmers iand j(i.e., the functions governing the utility they receive from
consumption at a particular date-state) are both increasing, concave, and con-
tinuously differentiable. Show that in an efficient allocation these two farmers’
marginal utilities will be perfectly correlated.
(c) Now suppose that with probability ψ > 0 known to the farmers, a government
program is introduced at time tthat will give eligible farmers (say just farmer 1
in this village) an additional unit of the consumption good in every period from t
on. How does this additional source of risk affect the date-state tree you sketched
above?
(d) If in fact the program is introduced, then how do you expect the announcement of
this program to affect the allocation of consumption between eligible and ineligible
farmers at t? At t+ 1? At t1?
(e) It turns out that this village is merely one in a population of villages which are
being randomly assigned to “treatment” and “control” groups, with the “treat-
ment” being the introduction of the program. A “baseline” survey of consumption
1
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Download Development Economics Exam: Inequality, Technology, Ethnic Divisions, Education Questions and more Exams Economics in PDF only on Docsity!

Development Field Exam

January 12, 2011

This exam has two parts: A section of four long questions and a section of four short questions. You should answer only three of the four longer questions. However, please answer all four short questions.

Longer Questions

Complete three of these longer questions. Each is worth 30 points. These may require a more sustained argument than the short questions, but clarity and concision are still very desirable. We would prefer that you do not use a blue book, but instead use letter-sized notepaper, written on one side. Please also begin each long question you complete on a new sheet of paper.

  1. Insurance and Inequality Consider a village of n farmers who live over T periods. Each person has a time-separable von Neumann-Morgenstern utility function, and derives utility from consumption. Each farmer i harvests a quantity of the consumption good ei ∈ { 1 , 2 } in every period, with the probability of a good harvest varying by person (but not over time), so that Pr(ei = 2) = πi.

(a) Supposing that n = 2, sketch a state-date tree for the economy described above. (b) Relaxing the assumption that n = 2, assume that the momentary utility func- tions of farmers i and j (i.e., the functions governing the utility they receive from consumption at a particular date-state) are both increasing, concave, and con- tinuously differentiable. Show that in an efficient allocation these two farmers’ marginal utilities will be perfectly correlated. (c) Now suppose that with probability ψ > 0 known to the farmers, a government program is introduced at time t that will give eligible farmers (say just farmer 1 in this village) an additional unit of the consumption good in every period from t on. How does this additional source of risk affect the date-state tree you sketched above? (d) If in fact the program is introduced, then how do you expect the announcement of this program to affect the allocation of consumption between eligible and ineligible farmers at t? At t + 1? At t − 1? (e) It turns out that this village is merely one in a population of villages which are being randomly assigned to “treatment” and “control” groups, with the “treat- ment” being the introduction of the program. A “baseline” survey of consumption

expenditures is being conducted at t − 1, with a follow-up scheduled for t + 1. The reseachers conducting the study are planning to use a “double-difference” strategy to estimate the average treatment effect on consumption (for eligible farmers) and on “spillovers” for the consumption of ineligible farmers. What do your answers to (b) and (d) imply about the interpretation of these estimates?

  1. Technology Adoption Analyze and contrast the positions of Foster and Rosenzweig, Duflo, Kremer, and Robinson, and Suri, on the importance of profitability for the adoption of fertilizer and improved seeds in Africa. Explain with precision how each support its position, reporting in detail on the empirical evidence if it applies. Explain how each argues against studies that contradict its position in the debate. State your own view in this debate.
  2. Ethnic and social divisions

(a) Characterize the empirical relationship between country-level ethnic diversity, public policy outcomes, and economic performance over the past fifty years. Which region of the world was arguably the most adversely affected by high levels of ethnic diversity? (b) Discuss at least two distinct theoretical mechanisms that could link high ethnic diversity to low public goods provision. Discuss the empirical evidence on the relative importance of these various channels. (c) Describe at least one public policy approach that could potentially mitigate the adverse effects of diversity on public goods and economic performance. In your view, are these policies likely to be successful in practice? Why or why not?

  1. Education and economic development

(a) Discuss the various channels for why education matters for development. What does the empirical evidence say about the relationship between growth and educa- tion? How might education affect the way we think about the effects of institutions on growth? Be sure to cite relevant studies. (b) If education is important for development, why are policy interventions necessary? Discuss in detail two studies that have studied interventions aimed at increasing the demand for schooling. Discuss in detail two studies that have looked at supply-side interventions for schooling. Be sure to provide a discussion of the data, econometric approach, and robustness of the findings.