Problem Set 2-Economics Developmment-Ray

1. Ray, Development Economics. Chapter 5, Exercise 2 on tax evasion
2. Ray, Development Economics. Chapter 5, Exercise 10 on telephone networks.
3. Briefly discuss 3 mechanisms linking history to present day economic development based on
the readings we covered in class (limit your answer to less than 2 pages).
4. The following problem is very similar to the research article measuring the impact of the
school construction program in Indonesia by Esther Duflo.
Mexico introduced a program called Programa Escuelas de Calidad (PEC) in 2001. Primary
schools enrolled in PEC receive a 5-year grant of $15,000 for supplies and teacher skill
development and free training for the principal. In principle, every primary school may
participate; in practice, about 10% did by the 2003/04 school year. The program specifically
targets disadvantaged urban schools using an advertising campaign.
You have a data set that tells you the dropout rate (the proportion of students who did not
return to school in the following year) at 74,701 primary schools in each year from 2000/01
to 2003/04. Of these schools, 1767 became enrolled in PEC at the beginning of 2001/02, an
additional 7477 became enrolled by the beginning of 2003/04, and 65,457 were still not
enrolled by the end of the period covered. (You can assume that once a school becomes
enrolled, it stays with the program for 5 years.)
The Government of Mexico has hired you to estimate the effect of participation in PEC on a
school’s dropout rate.
a) Some public official suggests that you look at the 1767 schools that were enrolled in
2001/02 and compare their dropout rate in 2000/01 to their dropout rate in 2003/04. Is
this a good approach? Explain why or why not.
b) Another public official suggests you compare the 1767 schools that had been receiving
PEC from the start to the 65,457 schools that never enrolled, and take the difference in
their 2003/04 dropout rates as the effect of PEC. Do you think this is a good approach?
Explain why or why not.
c) Using this data set, describe your research strategy to estimate the effect of PEC on
dropout. Be precise in describing how you will calculate your estimate.


Thank you so much.Q1 and Q2 is on the PDF  of Chinese edition.

Q3cover a lot of material and I post it .Thank you for answering any of this question.