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Question: a critical question is what happens to the welfare of...

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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.1 Now, let Y denote income and D denote migration status (i.e. 1 if individual migrated and 0 otherwise). And, remember that ATETRUE +Selection Bias5. What is Anas estimate of the naive Average Treatment Effect on the Treated? (provide a number)6. What is the true causal impact of migrating on the income of households where someone migrated? (provide a number) How large is the selection bias? (provide a number) Are the 1,000 households where no one migrated a good counterfactual for the 1,000 households where someone migrated? Why? 7. 8.

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