Essays on income shocks and health in Ecuador

Field: Economics, Econometrics and Finance (Social Sciences)

This dissertation examines how exogenous changes in income affect the most vulnerable populations in Ecuador: poor children and their mothers. It explores the effects of a negative income shock that is due to the 1998-2000 economic crisis and a positive income shock that is due to the introduction of a cash transfer program, the <italic>Bono de Desarrollo Humano</italic>. The outcomes examined are those related to early childhood development and to spousal domestic violence. Both improvements in child development and reductions in domestic violence are crucial for breaking the inter-generational transmission of poverty and for achieving the Millennium Development goals.The first chapter of this dissertation investigates the effects of Ecuador's 1998-2000 economic crisis on child health and cognitive development. This crisis was characterized by a drastic increase in prices and the eventual adoption of the dollar as its currency. While many reports show that household consumption decreased and poverty increased, there are no studies on the impact of the crisis on child development. I use data from three and five years after the crisis to investigate whether the Ecuadorian crisis had a negative and persistent impact on children's height and language development. In order to estimate the effect of the crisis on child outcomes I take advantage of the variation in children's exposure to the crisis that is due to birth month and province. Results suggest that one year of exposure to the crisis significantly decreased height-for-age z-scores by .1 SD and vocabulary test scores by 2.4 points. The effect of the crisis, however, was not uniform across households. Particularly, in rural areas children from farming households and those with more access to early childhood nutrition programs were significantly more protected from the crisis. Potential pathways through which the crisis impacted child outcomes are also explored.The second chapter, which is co-authored with Lia Fernald, takes advantage of the randomized roll-out of Ecuador's <italic>Bono de Desarrollo Humano</italic> (BDH) to examine the effects of an exogenous increase in income on the health and development outcomes of very young children. Families enrolled in the BDH received a monthly cash stipend ($15 USD) representing an approximate 6-10% increase in household income. Participants analyzed in this study are children 12-35 months old from treatment and comparison communities in rural and urban Ecuador. Main outcomes measured are language skills (the FundaciÃ³n MacArthur Inventorio del Desarollo de Habilidades Comunicativas - Breve), height-for-age z-score, and hemoglobin concentration. Results indicate that in rural areas, being randomized to receive the BDH in very early childhood led to significantly better performance on the number of words a child was saying, and on the probability that the child was combining two or more words. There were no significant effects on language development for children in urban areas and there were no effects on height-for-age z-score or hemoglobin concentration in rural or urban areas. A limited number of potential pathways with respect to cognitive/language stimulation, health behaviors, and parenting quality are also explored. Findings indicate that compared to children in comparison areas, rural children in treatment areas were more likely to have received vitamin A or iron supplementation and have been bought a toy in the past six months. The third chapter, which is co-authored with Lia Fernald, also takes advantage of the randomized roll-out of the <italic>Bono de Desarrollo Humano</italic> to investigate how an exogenous increase in a mother's income impacts spousal domestic violence. We use existing household bargaining models to predict when a cash transfer will lead to an increase in domestic violence and when it will lead to a decrease. Consistent with predictions, results reveal that for more educated women who had more credible outside-of-marriage options, the BDH decreased psychological violence. However, for less educated women who did not have credible outside options, the effect of the cash transfer was ambiguous and depended on whether the husband or partner had more education than his wife or partner. In particular, for less educated women the cash transfer decreased psychological violence in households where the husband or partner had more education than his wife or partner, and it increased psychological violence in households where the opposite was true. Although the BDH led to significant changes in psychological violence, it did not lead to corresponding changes in physical violence.