Seminar 6

I. Gender

Qian (2008) tests whether increased relative female income affects preferences for girls or boys.

1. How does she test this? What empirical strategies are used? Are the strategies credible?
2. Do her results necessarily imply that more girls survive when girls are more profitable? What is the additional piece of evidence that she uses to argue that last point?

Jensen and Oster (2009) analyze whether cable TV affects women’s status.

3. Why should economists care about cable TV?
4. Why would TV have an effect on women’s status?
5. How do they analyze the question (focus in particular on how they try to deal with omitted variables)?
6. What do they find and do you think the results are internally valid?
7. Can they distinguish between different mechanisms and are the results externally valid?

II. Inequality and growth with incomplete credit markets

Consider a simple economy with two agents L and H with initial endowment a_L and a_H (a_L <a_H). Time is discrete and for simplicity both agents save a constant share s of their earnings for the next period.

1. Both agents has a production technology y=f(k) where k is capital invested (they always work one unit of labor), and the production function has standard properties f’>0, f’’<0.
   Consider first the case where there is a credit market. If both agents try to maximize current period production, show that L would want to borrow from H and how this would improve efficiency.
2. Assume now that there are frictions in the credit market. For simplicity, we simply say that borrowing and lending is impossible. Show that this reduces current period aggregate production and aggregate savings relative to what you could derive in question 1). What happens to next period’s production and savings relative to the scenario in question 1)?
3. Show that there is a steady state equilibrium, and explain how it depends on the initial endowment a_L and a_H.

III. The empirics of inequality and growth (from the Exam 2015)

1. Explain the challenges of empirically investigating the causal effect of inequality on growth.

2. How does Easterly(2007) overcome these?