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

Listed author(s):
  • 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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File URL: http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1146.pdf
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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
Handle: RePEc:usg:econwp:2011:46
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  1. Gordon B. Dahl & Lance Lochner, 2012. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit," American Economic Review, American Economic Association, vol. 102(5), pages 1927-1956, August.
  2. James Heckman & Flavio Cunha, 2007. "The Technology of Skill Formation," American Economic Review, American Economic Association, vol. 97(2), pages 31-47, May.
  3. Basu, Kaushik & Das, Sanghamitra & Dutta, Bhaskar, 2010. "Child labor and household wealth: Theory and empirical evidence of an inverted-U," Journal of Development Economics, Elsevier, vol. 91(1), pages 8-14, January.
  4. Katrine V. Løken & Magne Mogstad & Matthew Wiswall, 2012. "What Linear Estimators Miss: The Effects of Family Income on Child Outcomes," American Economic Journal: Applied Economics, American Economic Association, vol. 4(2), pages 1-35, April.
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  9. Sandra E. Black & Paul G. Devereux & Kjell G. Salvanes, 2004. "The More the Merrier? The Effect of Family Composition on Children's Education," NBER Working Papers 10720, National Bureau of Economic Research, Inc.
  10. Ferreira, Francisco H. G. & Schady, Norbert, 2008. "Aggregate economic shocks, child schooling and child health," Policy Research Working Paper Series 4701, The World Bank.
  11. Robert Jensen, 2000. "Agricultural Volatility and Investments in Children," American Economic Review, American Economic Association, vol. 90(2), pages 399-404, May.
  12. Arleen Leibowitz, 1974. "Home Investments in Children," NBER Chapters,in: Economics of the Family: Marriage, Children, and Human Capital, pages 432-456 National Bureau of Economic Research, Inc.
  13. Lisa Cameron & Jenny Williams, 2009. "Is the relationship between socioeconomic status and health stronger for older children in developing countries?," Demography, Springer;Population Association of America (PAA), vol. 46(2), pages 303-324, May.
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  16. Bereket Kebede, 2005. "Genetic Endowments, Parental And Child Health In Rural Ethiopia," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(2), pages 194-221, 05.
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