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The tempest: Using a natural disaster to evaluate the link between wealth and child development

  • Felfe, Christina


  • Deuchert. Eva


How does family wealth affect children's development in the short- and long-run? We address this question by exploiting a shock occurred to family’s real estate, i.e. housing damages caused by a super typhoon. Our identification strategy is based on a comparison of children, who all lived in the same local area and thus were confronted with the same macro-economic shock, but only some experienced housing damages. We present evidence in favor of housing damages being essentially a severe wealth shock, with no effects on other observable channels which might directly harm children’s development. The shock results in a decline of educa-tional investments, but not of health-related investments. We observe a deterioration of chil-dren’s educational achievements in the short-run and even more pronounced in the long-run. Our findings are mainly driven by children whose families are at the bottom of the wealth distribution or lack the support of a strong family network.

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Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1146.

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Length: 58 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:usg:econwp:2011:46
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