Problem set 5 Belinda Monllor Yin

1 Gender Gaps in education(30 points)

Read \Evans, D.K., Akmal, M. and Jakiela, P., 2021. Gender gaps in education: The long view. IZA
Journal of Development and Migration, 12(1)."

1. “Former World Bank president Jim Yong Kim said that “investing in gender equality and girls"
education isn't just the right thing to do; economically, it's one of the smartest things to do" (World
Bank, 2018a)." Can you find and describe some empirical causal evidence regarding the effects of
girls/women education that can provide support to this statement? Please summarize the
methodology (what are the assumptions behind the empirical strategy that justify claiming causality)
and the main results.

2. “We use the difference in education levels rather than the ratio of male years of schooling to
female years of schooling because doing so is less likely to suggest that gender gaps are declining
when they may not be". Can you provide a numerical example (or mathematical proof) that would
help clarify the authors' point?

3. In Figure 1, what does it mean if a country's trajectory line is to the right of the 45 degree line?

4. Does Figure 2 imply that women's education worsened over time in some parts of South Asia and
Sub-Saharan Africa? Why yes? Why no?

5. What does Figure 5 show?

6. Which empirical evidence in the paper support the statement “Gender gap in education are both
a symptom and a cause of gender inequality"?

2 Sanitation and Education (25 points)

1. If you were the economist hired to evaluate the impact of the national latrine construction, what
would be your primary concerns to understand whether you can estimate the impacts with a causal
interpretation?

2. Beyond school enrollment, what other outcomes you think would be of interest and why? (hint:
what other Y would you want to measure and regress against the school construction program)?

3. Suppose they also hire you to understand why despite the increases in school enrollment, there
were no improvements in student test scores. What data/variables would you try to obtain to shed
light on the mechanisms at play?
4. Suppose they are very happy with your work and they would like to hire you to design and
implement an RCT randomizing the construction of latrines in schools. Suppose you could have three
groups (pure control, latrine construction, latrine construction+something else). Given your answer
to the prior question, what type of treatment would you suggest in the \something else"?

5. Suppose you have data from baseline survey (collected before RCT takes place), and endline
survey (after RCT takes place). How would you evaluate the eects of the RCT?

3 Farming Family (25 points)

A farming family owns land of size a (acres), and farms it with labor l, using the production function Y
= 100l1=2a1=2. The farm has access to 4 total units of labor (you can think of 4 as the family size),
which it divides as nely as it wishes between working on the farm and o
the farm. O-farm employment yields a wage of 100 per unit. The farm can also hire in labor, again at
the wage cost of 100 per unit. But unlike family labor, hired labor has to be supervised, and for this
the farm has to hire a supervisor at a cost of 225. Once paid, the supervisor can costlessly supervise
all hired labor.

1. Prove that if the family has less than 16 acres of land (a 16), it will devote family labor equal to a=4
to the farm, hire in no additional labor, and hire out the remainder 4 􀀀 (a=4) for o -farm
employment.

2. Prove that if the family has between 16 and 49 acres of land, it will continue to operate as a full
family farm, with all its family members working full time on it, but will not hire in any labor. Above
49 acres, it hires a supervisor and at this threshold, its hiring of outside labor jumps up from 0 to
slightly over 8 units of hired labor, and then keeps climbing as a continues to rise.

3. Now suppose that the family has the additional option of leasing out some or all of its land at fixed
rental rate of R per unit. But assume that it cannot lease in any land.

- Calculate a threshold for R such that above this threshold, the family never farms any land, no
matter how much or how little land it owns, and leases it all out. [Hint: work out the implicit return
to land on the family farm after subtracting the imputed costs of family labor.]

- Can you work out what would happen for lower values of the land rental? For instance, can you
show values of R such that for small values of land, the family leases out nothing, then leases.

4. How would your answers to parts (2)-(3) change (if at all) if there were no fixed costs to
supervision, and if hired labor costs 25 per unit to supervise

instead?

4 Fixed Rent (20 points)

Kritik, a small farmer, has his own plot of land (call it A) and leases another plot (call it B) from a large
landowner, Mahreen. These are separate plots and he must farm them separately by allocating his
endowment of one unit of effort to the two plots, in the form of eA and eB. There is no cost of e ort
and the opportunity cost on one plot is just the cost of not using his effort on the other plot. The
production functions on the two plots are YA = A P eA and YB = B p eB so total output YA+YB and eA
+ eB = 1. Kritik's utility is strictly concave in his own income, he is risk averse. If Kritik earns x, his
utility is given by ln(x).

1. In the hypothetical case in which Kritik owns both plots of land, show that

his effort allocation is given by eA =A2 A2 + B2 ; eB = B2 A2 + B2 (1) with total output equal to p A2 +
B2

2. Now assume that if Kritik does not rent Mahreen's plot, he simply farms his own plot. With part
(1) in mind, show that Mahreen can extract a total ofp A2 + B2 􀀀 A in rent, and demonstrate how she
can do that using a fixed rent contract.

3. Suppose that output is uncertain (we won't formally model this here, though see question 3) and
that Mahreen can only take a share of YB as rent. Find an expression for the rent that Mahreen can
get out of Kritik, expressed as a function of and the other exogenous parameters A and B of the
model.

(You will need to solve out for Kritik's effort level on the plot for each , the answer will be similar to
that in part (1).)

4. Without doing any further calculations, try and use your intuition to argue why Mahreen's rent
must now be lower compared to what she gets in part (2).