Journal Article

Aggregate Economic Shocks, Child Schooling, and Child Health

Francisco H. G. Ferreira and Norbert Schady

in The World Bank Research Observer

Published on behalf of World Bank

Volume 24, issue 2, pages 147-181
Published in print August 2009 | ISSN: 0257-3032
Published online July 2009 | e-ISSN: 1564-6971 | DOI: http://dx.doi.org/10.1093/wbro/lkp006
Aggregate Economic Shocks, Child Schooling, and Child Health

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  • Welfare and Poverty
  • Demographic Economics
  • Economic Development

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Do aggregate income 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 have a long-lasting impact on poverty and its intergenerational transmission. The authors develop a simple framework to analyze the effects of aggregate economic shocks on child schooling and health. They show that the expected effects are theoretically ambiguous because of a tension between income and substitution effects. They then review 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 procyclical: 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 procyclical and education outcomes counter-cyclical. Each of these findings is consistent with the simple conceptual framework. The authors discuss possible implications for expenditure allocation.

Keywords: I30; J13; O15

Journal Article.  14413 words.  Illustrated.

Subjects: Welfare and Poverty ; Demographic Economics ; Economic Development

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