Inequality in the Household: How Parental Income Matters for the Long-Term Treatment of Healthy and Unhealthy Siblings

We study whether neonatal health predicts future health and education and test if parents compensate/reinforce early health differences by investing more/fewer resources in their less healthy offspring using a 9-year panel of Mexican siblings. We contribute to the literature, typically focused on birth weight and short-term outcomes, by leveraging a rich set of measures considering weight-by-length-of-birth and offering evidence on how early health influences parents’ allocations among siblings from childhood to adulthood. Our rich data also allow us to control for prenatal and postnatal mothers’ behavior which is crucial for future children’s development. Our results suggest that unhealthy children at birth have worse adult health, a lower height, and fewer years of schooling between ages 5 and 22. Moreover, poorer parents invest nearly 15% fewer economic resources in their less healthy offspring, widening the gap in outcomes between siblings across time. On the contrary, more affluent parents continuously compensate for early disadvantages.