Impact of Early-Life Shocks on Human Capital Formation: Evidence from El Niño Floods in Ecuador

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Date and Time: 
Thursday, December 3, 2015
12:00 pm – 1:00 pm
Maria Fernanda Rosales-Rueda
University of California, Irvine

A growing body of research argues that early adverse experiences have lasting effects on human capital accumulation. In this paper, I investigate the persistent effect of negative shocks early in life on children's health and cognitive outcomes, and explore whether timing of exposure matters differentially by type of skills. I exploit the geographic intensity of extreme floods during the 1997-1998 El Niño phenomenon in Ecuador as a source of exogenous variation in children's exposure to a negative shock at different periods early in life. I show that children exposed to severe floods in utero, especially during the third trimester, are shorter in stature five and seven years later. Also, children affected by the floods in the first trimester of pregnancy score lower on cognitive tests. I explore potential mechanisms by studying how exposure to the El Niño shock affected key inputs to the production of children's human capital: health at birth and family inputs (income, consumption, and breastfeeding). Children exposed to El Niño floods, especially during the third trimester in utero, were more likely to be born with low birth weight. Furthermore, households affected by El Niño suffered a decline in income, total consumption, and food consumption in the aftermath of the shock. Falsification exercises and robustness checks suggest that selection concerns such as selective fertility, mobility, and infant mortality do not drive these results.