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Please answer question 1-3. Thank you.A critical question is what happens to the welfare of rural households when they engage in migration. When households lose labor, it may be harder for them to participate in and generate income from other activities such as agriculture. Remittances may partly compensate for these negative effects. In addition, a reduction in household size means less consumption pressure on the household. ANA, a famous theoretical economist, is trying to estimate the causal impact of migration on household income. Ana took a random sample of 1,000 households where a household member has migrated and another random sample of 1,000 households where no household member has migrated. In Anas final report she estimates the naive Average Treatment Effect (ATE) on the Treated of the program by subtracting the average income of the 1,000 households where no one migrated from the average income of the 1,000 households where someone migrated. For the rest of this question, use the following information The average income of the 1,000 households where no one migrated is 30,000 CFA The average potential income of the 1,000 households where no one migrated had they migrated is 35,000 CFA The average income of the 1,000 households where someone migrated is 42,000 CFA The average potential income of the 1,000 households where someone migrated had not they migrated is 33,000 CFA What are the two averages that Ana can observe in her data? What are the two averages that Ana would like to have to estimate the true Average Treatment Effect on the Treated? What are the two averages that Ana would like to have to check if there is selection bias? 1. 2.

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Answer #1

.1 Two Averages that Ana can observe in her data:

  • Average income of the thousand households where no one migrated
  • Average income of the 1000 households where someone migrated

.2The two averages Ana would like to have to estimate:

  • Average potential income of the 1000 households where no one migrated had they migrated
  • Average potential income of the 1000 households where someone migrated had not they migrated

.3 The two averages Ana would like to have to check if there was selection bias

  • Average income of the thousand households where no one migrated
  • Average income of the 1000 households where someone migrated
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