Privatization of water supply and human capital accumulation

This study presents empirical evidence that a health improvement program—privatization of municipal water services—in Argentina during the 1990s has had a negative effect on long-term human capital accumulation. Exploiting variations across regions and cohorts, I find that early childhood exposure to the program reduces years of schooling by around 0.5 years. The negative effect is more pronounced for males. I further use the previous census to examine the identical cohorts when they were at school age. I find that they are more likely to drop out of school and participate in the labor force after the program, and the effect is, again, more marked for boys. The finding is consistent with families preferring healthier children to go to work after improvements in health status.