Working Paper: NBER ID: w23347
Authors: Elizabeth Frankenberg; Duncan Thomas
Abstract: Human capital, including health and nutrition, has played a key role in the literature on poverty traps. Economic shocks that affect human capital during early life are thought to translate into permanently reduced levels of human capital and, thereby, push individuals into poverty. Three potential concerns in this literature are explored with empirical evidence drawn from primary longitudinal survey data collected before and after two major shocks in Indonesia: the 1998 financial crisis and the 2004 Indian Ocean tsunami. First, it is very hard to identify shocks that are unanticipated and uncorrelated with other factors that affect human capital outcomes. Second, and related, there is abundant evidence that individuals, families and communities invest in strategies that are designed to mitigate the impact of such shocks. The nature and effectiveness of the myriad array of these behaviors vary with the context in ways that are not straightforward to measure or model. Third, the impacts of shocks on human capital outcomes in the short and longer-term may differ precisely because of the behavioral changes of individuals and their families so that drawing inferences about the longer-term impacts based on negative impacts in the short term can be very misleading. The picture of remarkable resilience that emerges from investigating the impacts of major shocks on child health and human capital in Indonesia is nothing short of stunning.
Keywords: Human Capital; Economic Shocks; Education; Health; Nutrition
JEL Codes: I1; I2; O1; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic shocks during early life (J19) | human capital outcomes (J24) |
| economic shocks (F69) | investments in education and health (I25) |
| shifting spending priorities (E62) | future human capital investments (J24) |
| immediate impacts (F69) | long-term consequences (I12) |
| 1998 financial crisis (F65) | height-for-age (O15) |
| asset liquidation and reduced educational spending (H69) | long-term implications on human capital (J24) |