please answer all questions please

2 Poverty Traps [ 30 points] For this question, please read the paper "Why do People Stay Poor?" by Clare Balboni, Oriana Bandiera, Robin Burgess, Maitreesh Ghatak, and Anton Heil. You need to take a detailed look at the introduction and the figures and tables in the paper. The paper studies an NGO program that transfers large assets (cows) to the poorest women in villages located in the poorest districts of Bangladesh. The structural model of occupational choice is beyond the scope of the course so you don't need to worry about it. 1. Panel A of Figure 1 plots the distribution of assets in treated and control villages before implementing the program. The authors claim that as this distribution is bimodal, it suggests there is evidence of poverty traps. Based on the discussion in class about the existence of poverty traps, why would this be the case? Hint: Panel B of Figure 3 provides a similar example of the S-shaped capacity curve. [5 points] 2. Panel B of Figure 1 shows the distribution of assets immediately after receiving the transfers of cows. The authors claim that this allows them to study poverty traps as some households move out of the low steady-state. Based on the lecture and the transition of assets over time, why would this be the case? Hint: under a poverty trap, why some households would be able to move to the high mode of the distribution of assets in the long run if their new level of assets is above a specific threshold? [5 points] 3. The authors estimate the relationship between assets in 2011 and assets immediately after the transfer in 2017 using a non-parametric regression in Figure 4. (a) What is the dashed, green line in Figure 4? Why does it matter to find evidence of a poverty trap? [2 points] (b) Explain in words what is a non-parametric regression. [2 points] (c) What can you infer about the functional form of the transition of assets between 2007 and 2011? [2 points] (d) What is the slope of the transition equation of assets at 2.333 ? Why would this be evidence of poverty traps? [2 points] 4. For the estimation in Figure 4, the authors only use the villages where households receive the transfers. Why it might be problematic to use this variation to estimate the transition equation? Hint: Think about the non-parametric estimation between calories and household expenditure in Deaton and Dreze. [5 points] 5. Figure 6 compares the change in productive assets between 2007 and 2011 for households below and above the threshold. The left panel presents the difference in treated villages. The right panel presents the estimates in control villages. In this latter case, the x-axis is what would have been the level of assets in case these households had received the transfer. (a) Why does the comparison across treatment and control villages solve some of the concerns in question 4 ? [3 points] (b) What happens to the change in assets when households cross the threshold in treated villages? what happens in control villages? [2 points] (c) Is this supportive evidence of poverty traps? why? [2 points] 2 Poverty Traps [ 30 points] For this question, please read the paper "Why do People Stay Poor?" by Clare Balboni, Oriana Bandiera, Robin Burgess, Maitreesh Ghatak, and Anton Heil. You need to take a detailed look at the introduction and the figures and tables in the paper. The paper studies an NGO program that transfers large assets (cows) to the poorest women in villages located in the poorest districts of Bangladesh. The structural model of occupational choice is beyond the scope of the course so you don't need to worry about it. 1. Panel A of Figure 1 plots the distribution of assets in treated and control villages before implementing the program. The authors claim that as this distribution is bimodal, it suggests there is evidence of poverty traps. Based on the discussion in class about the existence of poverty traps, why would this be the case? Hint: Panel B of Figure 3 provides a similar example of the S-shaped capacity curve. [5 points] 2. Panel B of Figure 1 shows the distribution of assets immediately after receiving the transfers of cows. The authors claim that this allows them to study poverty traps as some households move out of the low steady-state. Based on the lecture and the transition of assets over time, why would this be the case? Hint: under a poverty trap, why some households would be able to move to the high mode of the distribution of assets in the long run if their new level of assets is above a specific threshold? [5 points] 3. The authors estimate the relationship between assets in 2011 and assets immediately after the transfer in 2017 using a non-parametric regression in Figure 4. (a) What is the dashed, green line in Figure 4? Why does it matter to find evidence of a poverty trap? [2 points] (b) Explain in words what is a non-parametric regression. [2 points] (c) What can you infer about the functional form of the transition of assets between 2007 and 2011? [2 points] (d) What is the slope of the transition equation of assets at 2.333 ? Why would this be evidence of poverty traps? [2 points] 4. For the estimation in Figure 4, the authors only use the villages where households receive the transfers. Why it might be problematic to use this variation to estimate the transition equation? Hint: Think about the non-parametric estimation between calories and household expenditure in Deaton and Dreze. [5 points] 5. Figure 6 compares the change in productive assets between 2007 and 2011 for households below and above the threshold. The left panel presents the difference in treated villages. The right panel presents the estimates in control villages. In this latter case, the x-axis is what would have been the level of assets in case these households had received the transfer. (a) Why does the comparison across treatment and control villages solve some of the concerns in question 4 ? [3 points] (b) What happens to the change in assets when households cross the threshold in treated villages? what happens in control villages? [2 points] (c) Is this supportive evidence of poverty traps? why? [2 points]