Pollution, Ability, and Gender-Specific Investment Responses to Shocks

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Date and Time: 
Thursday, October 6, 2016
12:00 pm – 1:00 pm
Teresa Molina
USC, Economics

The long-term effects of early-life health shocks on later-life human capital are well-documented, but the reasons why men and women often respond differently to these shocks are less well-studied. In this paper, I document that exposure to pollution in the second trimester of gestation leads to significantly lower cognitive ability in adulthood for both men and women. For women only, however, this shock to cognitive ability also leads to lower high school completion and income. I show that the gender difference in schooling responses is driven by two labor market features: (1) the higher female tendency to sort into the white-collar sector, and (2) the higher degree of complementarity between schooling and ability in the white-collar wage function. I verify this by structurally estimating a dynamic discrete choice model, which yields estimates of these sector-specific cross-partials.