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Sipa columbia university u6400 final fall 2013 solutions

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December 13 2013 Economic Analysis for International and Public Affairs I SIPA U6400. Fall 2013 SIPA-Columbia University Final Exam Your name: Instructions • Write your name in the space on the top of the page and return this exam paper with the bluebooks. • There are 3 questions. Answer all of them. Use a different blue book for each question. 3 bluebooks ⇐⇒ 3 questions Please Use a different blue book for each question. • Show all your work. The quality of the explanation determines the grade. Try to be precise and to the point. Make sure that all of your diagrams are clearly drawn and clearly labeled. Do not spend too much time on any question. • Exam is closed book and notes, except for the “reminder-sheet”. • Time allowed: 3 hours Question 1: 33 points Question 2: 34 points Question 3: 33 points Total: 100 points 1. (33 points) Uncertainty, insurance and asymmetric information Part A. Read the following excerpt from “Poor Economics” (chapter 6) by Banerjee an Duflo. All of these ways in which the poor cope with risk tend to be very costly. This has been well documented for agriculture: In India, poor farmers use farm inputs in a more conservative but less efficient way when they live in areas where rainfall is more erratic. Poor farmers’ profits rates go up by as much as 35 percent when they live in areas where the yearly rainfall pattern is very predictable. (a) (4 points) Using the concepts studied in this course, can you explain why poor fa ...
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