Working Paper: NBER ID: w19140
Authors: 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.
Keywords: human capital; rainfall shocks; educational outcomes; wages
JEL Codes: I25; J1; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rainfall shocks (Q54) | human capital investment (J24) |
| drought years (N52) | school attendance (I21) |
| drought years (N52) | test scores (C52) |
| high rainfall years (Q54) | school dropout (I21) |
| high rainfall years (Q54) | test scores (C52) |
| rainfall during schooling years (I21) | total years of schooling (I21) |
| rainfall during schooling years (I21) | wages (J31) |
| positive rainfall shocks (Q54) | opportunity cost of schooling (I21) |