2019), an essential predictor of stunting later in childhood (Christian et al., 2013). However, to the best of our knowledge no evidence yet exists that links the impacts of deforestation to stunting rates.

In this paper, we contribute to this emerging literature by taking a closer look at the water-borne channels and the causal effects of forest loss on human health. Such an endeavor is challenging due to the multiple factors determining health outcomes and the degree of complementarity that must be accounted for by including socioeconomic, demographic, infrastructure, environmental, behavioral, and institutional factors (Pattanayak & Pfaff, 2009). We exploit the wealth of data available in the Demographic and Household Surveys (DHS), which includes not only contemporaneous health and socioeconomic outcomes, but also full birth histories for all live births that occur in the years before the survey. We restrict our sample to 0.7 million children from rural areas<sup>1</sup> in 46 countries from 2000-2020 for which we have spatial coordinates. This allows us to link the health outcomes with high-resolution deforestation data and study the effects of forest loss on the incidence of DD (by linking lags of forest loss to the survey year) as well as stunting (by linking lags of forest loss to the birth year).

Identifying health impacts of forest loss is challenging given a trade-off between health costs and economic benefits that may be associated with agricultural expansion or urbanization following forest loss. To address the potential bias from non-random forest loss and confounding trends, we examine a possible water pathway from deforestation to health outcomes by exploiting quasi-random variation in deforestation upstream to assess the impacts on waterborne disease outcomes for rural households downstream. This allows us to isolate a waterspecific channel through which forest loss impacts health. We also carry out a series of falsification and robustness checks to rule out spurious temporal or spatial correlation and that the observed health outcomes are caused by water- and not air- or vector-borne diseases.

We then replicate the global analysis for Peru, which is one of the 10 most forest-rich countries in the world and has experienced rapid land use change over the last two decades, with 3.4 million hectares of forest lost between 2001 and 2020. One key advantage of this case study is that we are able to complement the DHS data with additional health surveys implemented by Peru’s National Institute of Statistics (a.k.a., INEI) using the DHS methodology. This provides us with a longer repeated cross section and the ability to control more comprehensively for time and location specific trends.

Our analysis indicates that deforestation increases DD incidence among children under five in downstream communities, but also offers new evidence of early-life exposure to deforestation on childhood stunting, a wellknown indicator of later-life productivity. Our results suggest that a 1 percent decline in upstream forest cover increases the probability of DD by 5.8 percent. These results are consistent with previous evidence (Herrera et al., 2017) and highlight the vital role that upstream forests play in regulating water flow and quality downstream. We also present new evidence on the long-lasting and significant health impacts of deforestation, with a 1 percent decline in upstream forest cover around the time of birth increasing the probability of stunting by 3.9 percent. This effect is particularly large in early childhood, measured by the first thousand days of life. These global results also hold for Peru for DD but less so for stunting, which could be due to significant governmentand donor-supported health and sanitation campaigns during our sample period aimed to reduce stunting.

Our analysis has both analytical and practical implications. From an analytical point of view, this study contributes to a growing literature on the complementarities between human and natural capital. It provides further evidence of the importance of the water channel for short- and long-term health outcomes. On the practical side, our results suggest that maintaining (and potentially restoring) natural capital has the potential

> 1 We restrict our sample to non-migrant children, i.e., children whose households have either always lived in their current location, or that have migrated to their current location before the child was conceived.

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