Parental Investment after Adverse Event: Evidence from the Great East Japan Earthquake

Parents often increase private investment in their children when they fear the negative effects of an adverse event. However, such an endogenous response makes it difficult to identify the cost of the adverse event and those disadvantaged by the shock. This study investigates the nature of an adverse shock that leads to endogenous responses by parents. Relying on the types of damage caused by the Great East Japan Earthquake, we find that parents exposed to intense ground motion increased their investment in children’s cognitive skills. This positive response survives or becomes even larger after accounting for physical destruction and radioactive contamination.