List of Online Response Questions: ECON1530, 2018

OR1.
1. If Jensen had allowed people to buy or sell vouchers then he would have been less
likely to find that households receiving a voucher that provides discounted rice end
up consuming less rice.

2. A good candidate for a price subsidy designed to increase calories among poor
households is an inferior good that has a close substitute.

3. In Atkin's articles migrant's food expenditures are higher for given income than non-
migrants but this is not because they face higher prices.

4. Suppose preferences are min(c1+1,2*c1+2*c2) and the budget constraint is

y=p1*c1+p2*c2. Then for y=1 and p1=2 , an increase in p2 from 1 to 2 results in an
increase in the consumption of good 2 from 1/3 to 1/2. Thus c2 is a Giffen good.

OR2.
1. Suppose (1) aggregate demand for rice in periods 1 and 2 is q1=3-p1 and q2=3-p2,
respectively (2) at the beginning of period 1 there is a stock of rice of s0 and at the
beginning of period 2 the stock of rice is anything not consumed in period 1 plus the
period 2 harvest y2. All remaining rice must be consumed in period 2 and the cost
of borrowing and rice storage is zero. If rice stocks are competitively traded then the
expected price change, E(p2-p1)=0, but if storage is characterized by a monopoly
E(p2-p1) =(s1+y2)/3

2. A recent article suggested that the introduction of cash transfers in remote villages in
Mexico led to deforestation. This result is consistent with the findings of Cunha et al
that cash transfers tend to affect the price of locally produced goods.

3. One disadvantage of in kind transfers targeted to poor households is that relative to

cash transfers, a large fraction of the benefit may accrue to better off households.
OR3.
1. If all workers were paid piece rates then unconditional transfers to poor households
would likely not affect worker productivity.

2. Controlling for income, child caloric intake is likely to be higher in a high disease
environment compared to a low disease environment if parental demand for child
health is sufficiently price inelastic.

3. If the weight 𝑤𝑡 production function is 𝑤𝑡+1 = 𝛼𝑤𝑡 + 𝜃𝑐𝑡 where 𝑐𝑡 is

consumption and the interest rate is r then the cost of raising a child's weight by one
(1+𝑟)𝑝𝑡 𝛼𝑝𝑡+1
unit in period t is + .
𝜃 𝜃

OR4.
1. The Foster and Rosenzweig technical change paper argues that the main difference
in responsiveness among landed and landless households with respect to technical
change in agriculture is an income effect.

2. The fact that the school building program in the Duflo paper increased primary
education but not secondary education suggests that the main impact of the program
was that it increased the quality of primary education by reducing school crowding.

3. If people form their estimates on the returns to schooling based on the experience of
people in the same economic strata as their parents then they are likely to
underestimate the benefits of schooling.

OR5.
1. The finding that, on average, people given mosquito nets for free are less likely to
use them than are people who buy their mosquito nets in the market is consistent with
a standard economic model in which the value of a purchased good is independent of
the price paid for the good
2. Based on Dupas's results an NGO could be advised that they needn't worry that if
they give away a health product for free then people will not accept it in the future if
they have to pay at least part of the cost of that product.
3. If households are especially poor they may not migrate, even given proper incentives,
because the risk of a failed migration is too high.
OR6.
1. Suppose that the cost of contracting a disease is 2 and there is a drug you can take to
prevent the disease that costs 1. Someone who takes the drug will not get the disease
but someone who doesn't take the drug will get the disease with probability 1-c where
c is the fraction of the population that took the drug. The private equilibrium is c=1/2
and the c that maximizes average wellbeing is greater than 1/2

2. The fact that the Dupas and Kremer papers come to different conclusions about
learning effects can be attributed in part to the fact that most mosquito bites are
painful but most worm infections are typically asymptomatic.

3. Suppose that the health production function for household I is ℎ𝑖 = 4𝑤𝑖 + (2 −

𝑤𝑖 )(𝑠𝑖 + 𝑠̅ ) where 𝑤𝑖 indicates whether or not there is piped water in the household,
𝑠𝑖 denotes the level of sanitation chosen by the household, and 𝑠̅ is the average
sanitation in the neighborhood. Let 𝑤 ̅ denote the fraction of households with piped
water and suppose that household utility is ℎ𝑖 + ln⁡(𝑦 − 𝑠𝑖 ) . If 𝑤𝑖 is taken as
exogenous, the level of sanitation in the household is y + (𝑤̅ + 1).

OR7.
1. In the Wilson model, suppose the probability of risky behavior is increasing linearly
in one's subjective probability of being HIV positive. Then if people underestimate
their probability of being HIV positive, testing will on average increase risky
behavior.

2. In the Dupas paper the relative risk treatment led the boys to significantly increase
their sexual activity.

3. The probability that someone has malaria is q. The cost of malaria treatment is
1/2 and of rapid malaria testing is 1/8. Health h is 0 if one has untreated malaria,
3/4 if one has treated malaria, or 1 if one is malaria free. Utility is the expectation of
h-x where x is expenditure on testing or treatment. Then people will not treat without
testing as long as q<1.
OR8.
1. Miller's study suggests that getting access to family planning program in one's late
20s not only reduces fertility but also increases the probability of formal employment
as predicted based on the time-cost model of fertility.

2. In a society with access to perfect contraception, a study finds that among two child
families, those families in which the children are twins have about the same education
as those families in which the children are not twins. This result is not necessarily
inconsistent with the quantity-quality fertility model.

3. Cash transfer programs to children in poor households who stay in school can create
a negative externality to childbearing even if these programs result in lower fertility
as predicted by the quality quantity model.

OR9.
1. If a famine has roughly the same effects on the survival of men and women it is not
likely to lead to changes in patterns of marriage when the relevant cohorts reach peak
ages at marriage.

2. Anerson and Baland suggest that women are more like to join ROSCAS when they
contribute a large share of household income because then they tend to have more
discretion over how household income is spent.

3. In a given marriage market there are 10 men of human capital hm=1 and 10 women
of human capital hf=1 and 5 women of human capital hf=2. The utility for marriage
of men is hm*hf+d and for women is hm*hf-d. The utility of being single is zero for
both sexes. The equilibrium d for a married high human capital woman is 0.
OR10.
1. Pitt Et al argue that girls schooling is rising faster than boys schooling in Bangladesh
primarily because boys have lower cognitive ability on average.

2. Technological change in India did not increase girls' human capital because women
are not involved in the labor market and do not make entrepreneurial decisions.

3. The fact that men consume more calories than women in Bangladesh is evidence that
men have stronger bargaining power than do women.

4. Suppose individual utility is (c-1)(g-1) and the budget constraint in a joint household
with n identical people is n*c+g=n*y where c is the private good per capita and g the
public good in the household. The assuming households maximizes the sum of
individual utilities, the share of income, spent on the private good is increasing in n
and y.

OR11.
1. Consider an ordeal mechanism with linear utility, a discount factor of 1/2, and a
random utility of applying for the program that is distributed on a uniform
distribution over the range [0,1]. The utility of not applying to the program for
someone with income y is thus y + 1/2y. Now suppose the cost of applying for the
program for someone within income y is y/2 and that the benefit , if they receive it,
is 2. Then individuals with an income of y>=3 will never receive the benefit if the
probability of receiving the benefit for an individual with income y conditional on
applying is 1-y/6.

2. Alatas et al find evidence that community households try to target resources towards
households that are deserving.

3. If work hours increase and earnings don't change very much then a program targeting
ultra-poor households could still be making households better off.