Inequality in the household: neonatal health effects on education outcomes and parents’ compensations among siblings

This study estimates neonatal health associations with future health and education outcomes and explores parents' reactions to low health endowments using a 9-year panel of Mexican siblings. We contribute to the literature by providing results on different aspects of the uterine environment in poorer settings and offering a more dynamic picture of how initial health influences education and parents' compensations among siblings, from childhood to adulthood. Our results are robust to different family fixed-effects models suggesting that unhealthy children at birth have worse adult health, a lower height, and fewer years of schooling at any age between 5 and 22. We offer evidence of reinforcing and compensating patterns among siblings: less-educated parents spend on average 15\% fewer economic resources on their less-healthy children's education, while wealthier parents invest 14\% more. Notably, the compensating pattern in richer settings starts early in life and remains consistent across all ages.