ECON

1530 TA Section Part 1

Figure 2: Interpret this figure.
Figure 2: Dupas (2010)
•  Short-run subsidies and long-run adopBon of new health products:
evidence from a field experiment
•  Field experiment for Olyset long-lasBng insecBcide-treated bed net (LLIN)
•  Two phases:
•  Phase 1:
•  Subsidy levels for Olyset LLINs randomly assigned across households.
•  Households had three months to acquire the LLIN at the subsidized price.
•  Prices varied from $0 to $3.80.
•  Phase 2:
•  A year later, all households in four villages were given a second opportunity to acquire an
Olyset LLIN, but this Bme everyone faced the same price ($2.30).
•  Key quesBons asked:
•  How does the subsidy affect long-run investment in this technology?
•  In parBcular: are there learning effects and/or anchoring effects?
Figure 2: InterpretaGon
•  Figure 3 presents two averages for each Phase 1 price group: the
average willingness to pay for a bednet declared at baseline, before
households had received the first voucher; and the average
willingness to pay declared at the follow-up.
•  Gaining access to a free or highly subsidized LLIN in the first year
increases households reported willingness to pay for an LLIN two
months later.
•  This suggests the presence of a learning effect which dominates any
potenBal anchoring effect.
Table 2: Interpret this table.
Table 2: Dupas (2010) – same paper!
•  Examines learning in more detail: looks at social network effects.
•  The higher the proporBon of neighbors who received the high
subsidy, the more likely the household is to have redeemed the
voucher and purchased the LLIN.
•  When looking at the results using the within 500m radius definiBon of
social networks: if all of a household’s received the maximum
subsidy, the probability of redeeming the voucher increases by 21.5
percentage points.
Table 3: Interpret this table.
Table 3: Atkin (2015)
•  “The caloric cost of culture: evidence from Indian migrants.”
•  Based on noBon that there are substanBal and persistent differences
in food preferences across social groups.
•  QuesBon: can such food cultures constrain caloric intake?
•  Key findings:
•  Migrants consume fewer calories than otherwise similar locals.
•  Migrants bring their own origin-state food preferences with them.
•  The gap in caloric intake is related to suitability of the migraBon desBnaBon
to migrants’ origin-state preferences.
Table 3: InterpretaGon
•  Column 2: compared to other households in the village, migrant
households have 6.2% higher per capita expenditure, 4.5% higher
per-capita food expenditure, and consume 1.3% more calories per
person.
•  Last three rows: do migrants face the same prices?
•  Migrants pay 0.3% more than non-migrants in the same village.
•  But controlling for food expenditure, there is no difference.
•  Column 3: migrant and non-migrant households seem more similar if
the wife moved for marriage sample. While migrant households sBll
have higher expenditures than non-migrants, the difference declines
by a third.
Online Response QuesGon #1
•  “If all workers were paid piece rates then uncondiBonal transfers to
poor households would likely not affect worker producBvity.”
OR3, Q1: Background
•  Foster and Rosenzweig, 1994.
•  Key quesBon: how do payment schemes (Bme-wage or piece rate)
affect effort levels?
•  Measure effort: make use of the biological balance equaBon in which
calorie intake and energy expenditure determine weight (body mass)
change.
•  Key findings:
•  Time-wage payment schemes and share-tenancy contracts reduce effort
compared to piece-rate payment schemes and on-farm employment.
•  The same workers consume more calories under a piece-rate payment
scheme or in on-farm employment than when employed for Bme wages.
OR3, Q1: Answer
FALSE.
•  Piece rate workers have a direct incenBve to increase their
producBvity. So they may use the uncondiBonal cash transfer to
increase their caloric intake, and be more producBve.
•  Time-wage earners, on the other hand, would not have an incenBve
to invest more in caloric intake, since producBvity would not affect
their wages.
Online Response QuesGon #2
•  “A recent arBcle suggested that the introducBon of cash transfers in
remote villages in Mexico led to deforestaBon. This result is
consistent with the findings of Cunha et al that cash transfers tend to
affect the price of locally produced goods. “
OR 2, Q2
•  Cunha, De Giorgi, Jayachandran, 2011
•  “The Price Effects of Cash Versus In-Kind Transfers”
•  Compares how cash and in-kind transfers affect local prices.
•  Both can affect demand for normal goods, but only in-kind transfers also
increase supply.
•  In-kind transfers should lead to lower prices than cash transfers, which helps
consumers at the expense of local producers.
OR2, Q2: Answer
True.
•  Cunha et al. have shown that cash transfers increase the price of local
goods (due to a shio in demand).
•  In response to higher prices, producers will want to produce more.
•  If deforestaBon is a side-effect of increased producBon, then this will
lead to more deforestaBon.
Online Response #3
•  “One disadvantage of in kind transfers targeted to poor households is
that relaBve to cash transfers, a large fracBon of the benefit may
accrue to beper off households.”
OR2, Q3: Answer
•  Cunha et al. (2011) again.
•  “In-kind transfers should lead to lower prices than cash transfers, which helps
consumers at the expense of local producers.”
•  The answer depends on who is rich and who is poor.
•  If the consumers are the worse-off (which we assumed in class), then the statement is false.
The benefit accrues to worse-off households.
•  If the producers are the worse-off (which seems to be suggested in the paper), then the
statement is true. The benefit accrues to the beper off households.
 OR 1, Q1
•  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.


 Background
•  Sec/on: Price effects of consump/on and health.
•  Jensen and Miller (2008): Giffen Behavior and
Subsistence Consump/on.
–  Subsidizing prices of dietary staples for extremely
poor households in two provinces in China: find
strong evidence for Giffen behavior for rice in one of
the provinces.
•  Giffen good: demand decreases when price
decreases.
•  Inferior good: demand decreases when wealth
increases.
 Answer
•  FALSE.
–  If Jensen had allowed people to buy or sell vouchers,
then if individuals sell the voucher the program would
essen/ally have had just an income effect.
–  A decrease in quan/ty consumed as a result of the
program would then just imply that the good is an
inferior good.
–  Inferior goods are more common than Giffen goods.
–  So it would be easier to find what appears to be a
Giffen good (but in fact is just an inferior good).
 OR 5, Q3
•  If households are especially poor they may not
migrate, even given proper incen/ves,
because the risk of a failed migra/on is too
high.


 Background
•  Sec/on: Adop/on of Health Technologies I.
•  Bryan, Chowdhury, Mobarak (2014):
Underinvestment in Profitable Technology:
the case of seasonal investment
–  Randomly assign an $8.50 incen/ve to households
in rural Bangladesh to temporarily out-migrate
during the lean season.

 Answer
•  FALSE.
–  Mobarak finds: "households that are close to
subsistence - on whom experimen/ng with a new
ac/vity imposes the biggest risk - start with lower
migra/on rates, but are the most responsive to
our interven/on" (pp. 1674).