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Economics of Development Exam #1 Condensed Notes
Terms in this set (40)
Measuring Economic Development
- GDP Per Capita
- Human Development Index (health, education, income)
- Calories Count/Nutritional Index
- Based on food → cost of basket of food to achieve certain # of calories + other necessary purchases
Nutritional Based Poverty Trap
- Too hungry & underfed to work, making them poor, so they can't buy nutritious food.
Jensen & Miller Experiment
- Families in China receive price subsidy for rice.
- Houses that received the subsidies consumed ↓ rice & ↑ meat.
- More calories not a priority. Better tasting was.
- Change in consumption level due to change in relative prices of goods.
- Change in consumption pattern due to change in purchasing power.
- Low income, non-luxury product.
- Demand ↑ when price ↑.
- Example: Rice in Jensen & Miller's Experiment.
Deaton & Dreze Experiment
- Indians wealthier in past 30 years, but consuming less calories over time.
- Conclusion: May not be a Nutritional Based Poverty Trap
Stock of Nutrition
- Over time.
- Reflected by child's height for their age.
Flow of Nutrition
- Current time.
- Reflected by child's weight for height.
- Below -2 SD from median height for age.
- Below -2 SD from median body size (weight for height).
- Below -2 SD from median weight for age.
Case & Paxson's Experiment
- Tall people have higher earnings.
- Accounted for through IQ.
Barker (or Fetal Origins) Hypothesis
- Risks of a number of chronic diseases may have origins before birth.
- Condition in utero has long-term impact on a child's life chances.
- Tanzania: Iodine supplement → ↑ kids education level by 1/2
Preventative Health Care Measures Puzzle
- Lack of knowledge
- Over-prescribed/over-treated vs under-treated
Case for Bed Nets
- Direct Effect: no mosquitoes biting uninfected.
- Indirect Effect (Positive Externality): mosquitoes less likely to carry disease from biting infected.
- Distinct advantage to get 50% coverage.
Bed Nets: Traditional Economics Arguments
- Positive externality → subsidies needed if private benefits not large enough that people already buy.
- With a new good, people need to learn how to use it & be convinced of worth.
Bed Nets: Less Conventional Economics Arguments
- Psychological Sunk Cost Effect
- Selection Effect
- Entitlement Effect
Psychological Sunk Cost Effect
- How much you pay gives you a sense of the value of the good.
- Receive it for free use it as frequently as people who purchased at higher prices → bed nets wasted.
- Give away for free → people who don't intend to use it get it → bed nets wasted.
- Free → Expect to get thing free in future.
Dupas & Cohen's Experiment
- Offer bed nets. Track purchase & usage.
- # of sales ↓ quickly with ↑ price.
- Usage, conditional on getting net, does not ↓.
- Criticism: well known in Kenya, long term effect may differ, all about external validity
- Findings: No Psychological Sunk Cost Effect, Selection Effect, or Entitlement Effect.
Why are Farmers Slow to Adopt New Technology?
- Too risky & don't know if actually ↑ production
- Don't trust information.
Why do People in Less Developed Nations have Lower Education Levels?
- Lost income
- No perceived return
- Girl's education valued less & "unnecessary"
- No schools close
- Poor quality of schools
Supply-Side Factors of Education
- No schools
- Bad roads/transportation tough
- Bad teachers
- Large Classes
Easterly's Argument About Education
- Supply-driven investment no useful.
- Rich countries have ↑ education because chose to be educated because saw country growing.
- No bed nets for free.
Demand-Side Factors of Education
- Barriers: Need child labor, Cost, Married, See little benefits, Poor quality
- Solutions: Free/reduced lunch, childcare, pay to go to school, role models, info campaign on returns to edu.
Progresa or Opportunidades Program
- CCT Program
- Gave money to rural poor to go to school & attend regular health clinics in Mexico
- Results: Secondary enrollment ↑
Baird, McIntosh, & Ozler's Experiment
- Role of conditionality in cash transfer programs.
- Paid young girls in Malawi to attend school
- CCT outperform UTC in ↓ dropout rates
If there is Little to No Demand for Education, Could a Top-Down Program be a Waste?
- Evidence from Indonesia, schools built
- Found that earnings ↑ among those who benefited from programs.
- ↑ education, ↑ wages
- Schools are beneficial
Other Benefits of Education
- Taiwan, 6-9 years of compulsory schooling → mothers who went to school longer have ↓ child mortality rates
- Nigeria, build schools → ↓ fertility in regions where more schools were built
Parents Misperceptions About Education
- Guarantee office/government job
- Returns to education is very uneven → put all eggs in one basket (resource in one kid)
- Ethiopian Jews airlifted to Israel
- Even most severe disadvantage from family background & early conditions can largely be compensated for where the right conditions are met
- India, quality education to underprivileged children
- Specifically if deficient in reading & math skills
- Focus on basic skills & commitment to idea that every child can master basics as long as she & her teacher expends enough effort
- Resources are finite (land)
- ↑ people → ↓ for everyone
- Eventually, high mortality puts population back in check (Black Death)
- But population grew w/o catastrophic disasters
- Due to technology progress making us more productive with the same resources
- Becher & Tommes
- Siblings compete for resources
- If quality is a normal good, poor parents tend to want to have more children.
Fertility Shocks: Evidence from Israel
- No sex-selective abortion or preference, only mixed
- Includes poor Israeli Arabs
- Find no effect at all
- No evidence of QQTO
Fertility Shock: Matlab Program Evidence from Bangladesh
- Regular access to contraceptives
- Initially fairly large ↓ in fertility
- But no difference in height, weight, school enrollment, years of education of children
- No evidence of QQTO
Contraception Availability as a Key Barrier: Evidence from Colombia
- Family planning program
- Did ↓ fertility, earlier women get access to contraception, the fewer kids they have.
- But effects were low & only explains 1/10 of total fertility ↓
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