Do environmental disasters affect human capital? The threat of forest fires

Although the threat of forest fires is prevalent across the globe, there exists limited empirical evidence on how such environmental disasters influence access and equity in educational outcomes through economic channels. In this article, I combine satellite data on fire radiative power with an individual-level panel dataset to estimate the short-term and long-term impact of forest fires on human capital in rural Nepal. Using a fixed effects panel regression approach, I find that a one standard deviation increase in fire radiative power from last year’s forest fires is associated with a 1.06 percentage point decline in the likelihood of completing middle school. Results indicate that a one standard deviation increase in fire radiative power from fires 6–10 years ago leads to a 6.34 percentage point decrease in the likelihood of completing middle school, implying that the impact of environmental shocks on educational outcomes can be larger in the long run. Subsequent analysis indicates that a yearly lagged fire radiative power exacerbates disparities in middle school completion between individuals that attend government schools and those that attend private schools. While the effects of fires on self-reported measures of health outcomes and absenteeism in school are statistically insignificant, individuals report an increase in worry about inadequate food and scholarships in response to a one standard deviation increase in fire radiative power from last year’s forest fires. These findings support the hypothesis that natural disasters lead to economic damage and food insecurity that, in turn, result in disinvestment in school supplies, higher grade repetition and lower likelihood of middle school completion in the developing world.