Drought of Opportunities: Contemporaneous and Long Term Impacts of Rainfall Shocks on Human Capital
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.
We would like to thank Marianne Bitler, Kitt Carpenter, Ed Glaeser, Rob Jensen, Larry Katz, Michael Kremer, and Emily Oster for helpful comments. Seminar participants at CMC, CSUF, Harvard, HKUST, NBER Summer Institute, UC Berkeley, UCI, UCSC, USC, and PacDev provided useful feedback. We thank Wilima Wadhwa for generously sharing the ASER data. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Manisha Shah & Bryce Millett Steinberg, 2017. "Drought of Opportunities: Contemporaneous and Long-Term Impacts of Rainfall Shocks on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 125(2), pages 527-561. citation courtesy of