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Review Session 5 Last review of the micro part

Review Session 5 Last review of the micro part. Catalina Martinez c atalina.martinez@graduateinstitute.ch Office hours: Tuesdays 6-8pm Rigot 27 Extra office hours before the midterm: Friday Oct 26 3-5pm. Economics and Development MDev 2012-2013 THE GRADUATE INSTITUTE | GENEVA. Agenda.

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Review Session 5 Last review of the micro part

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  1. Review Session 5Last review of the micro part Catalina Martinez catalina.martinez@graduateinstitute.ch Office hours: Tuesdays 6-8pm Rigot27 Extra office hours before the midterm: Friday Oct 26 3-5pm. Economics and Development MDev 2012-2013 THE GRADUATE INSTITUTE | GENEVA

  2. Agenda The idea of today’s session is discuss tricky concepts and graphs for each topic in which there may still exist some difficulties. • Households • Credit • Insurance • Land • Past exams questions Then we will have time for your questions

  3. Separability • Separability: • Decide first on optimal consumption level. • Then choose optimal consumption level. Udry finds that this does not take place inside the household… • Marginal productivity is decreasing: there exists a point after which giving more inputs to male plots is inefficient

  4. Cost of non-separability(Arcand 2011)

  5. CreditRationing

  6. Risk Aversion Prefer W=E[W] as a fixed payment to any randomness in w

  7. Insurance • Idyosincraticvs common shocks • Consumption smoothing

  8. Sharecropping B Production Function A Output, Costs The tenant maximizes his production given his costs If he could keep all the production, the optimal choice of labor is L* Under sharecropping the optimal choice is L’ C E Production Costs D L’ L* Labor

  9. Dominant Contract according to agents’ efficiency[γ1: landlord AA management; γ2: tenant AA supervision]

  10. Past exams – Land questions Final 2010 Q1 Sharecropping and risk sharing It is often said that sharecropping is a contractual form that is chosen because it allows tenants and land- lords to share risk over agricultural production. If you limit yourself to fixed rental contracts on the one hand, and wage contracts on the other, and if you assume that all that the tenant possesses is his time and the only thing that the landlord possesses is his land, show that the risk-sharing argument necessarily breaks down. Show that for this to be true it must be the case that landlord land and tenant time are perfectly divisible.

  11. Past exams – Land questions Final 2011 Q2 A widely observed fact of agriculture in developing countries is the inverse relationship between farm size and productivity; that is larger firms tend to produce lower output per acre than smaller ones. Provide possible explanations for this stylized fact and discuss some possible consequences for the intra-household allocation of resources.

  12. Questions

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