Aggregate economic shocks, child schooling and child health

Francisco H. G. Ferreira () and Norbert Schady

No 4701, Policy Research Working Paper Series from The World Bank

Abstract: Do aggregate economic shocks, such as those caused by macroeconomic crises or droughts, reduce child human capital? The answer to this question has important implications for public policy. If shocks reduce investments in children, they may transmit poverty from onegeneration to the next. This paper uses a simple framework to analyze the effects of aggregate economic shocks on child schooling and health. It shows that the expected effects are ambiguous, because of a tension between income and substitution effects. The paper then reviews the recent empirical literature on the subject. In richer countries, like the United States, child health and education outcomes are counter-cyclical: they improve during recessions. In poorer countries, mostly in Africa and low-income Asia, the outcomes are pro-cyclical: infant mortality rises, and school enrollment and nutrition fall during recessions. In the middle-income countries of Latin America, the picture is more nuanced: health outcomes are generally pro-cyclical, and education outcomes counter-cyclical. Each of these findings is consistent with the simple conceptual framework. The paper discusses possible implications for expenditure allocation.

Keywords: Health Monitoring&Evaluation; Population Policies; Economic Theory&Research; Health Systems Development&Reform; Labor Policies (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-edu and nep-hea
Date: 2008-08-01
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