ECN 115A U.docx - ARE/ECN 115A Summer Session I 2019 Problem Set 1 Potential Outcome Framework and Poverty Measures Due July 3 2019 Question 1 Migration

ECN 115A U.docx - ARE/ECN 115A Summer Session I 2019...

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ARE/ECN 115A Summer Session I 2019 Problem Set 1: Potential Outcome Framework and Poverty Measures Due: July 3, 2019 Question 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. ANA, a famous theoretical economist, is trying to estimate the causal impact of migration on household income. Ana 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 Ana’s final report, she estimates the naive Average Treatment Effect (ATE) on the Treated 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. 1 For the rest of this question, use the following information: The average income of the 1,000 households where no one migrated is 29,000 CFA The average potential income of the 1,000 households where no one migrated had they migrated is 35,000 CFA The average income of the 1,000 households where someone migrated is 42,000 CFA The average potential income of the 1,000 households where someone migrated had not they migrated is 32,500 CFA 1. What are the two averages that Ana can observe in her data? For each one of the 2000 households in the sample, Ana has information about their income and current migratory status. That is, whether the household has a member who migrated or not. Thus, the two averages that Ana observes are: i) the mean income of the 1000 households where someone migrated, and ii) the mean income of the 1000 households where no one migrated.
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  • Fall '09
  • StephenA.Vosti

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