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Drought of Opportunities: Contemporaneous and Long Term Impacts of Rainfall Shocks on Human Capital

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  • Manisha Shah
  • Bryce Millett Steinberg

Abstract

Higher wages are generally thought to increase human capital production especially in the developing world. We show that human capital investment is procyclical in early life (in utero to age 3), but then becomes countercyclical. We argue this countercyclical effect is caused by families investing more time in schooling when outside options are worse. We show that children and mothers report a lower likelihood of work in drought years, and children are more likely to attend school. In addition, we find long term impacts of these shocks: adults who experienced more rainfall during school years have lower overall total years of schooling and lower wages. These results suggest that the opportunity cost of schooling, even for fairly young children, is an important factor in determining overall human capital investment.

Suggested Citation

  • Manisha Shah & Bryce Millett Steinberg, 2013. "Drought of Opportunities: Contemporaneous and Long Term Impacts of Rainfall Shocks on Human Capital," NBER Working Papers 19140, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19140
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    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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