Child health and the intergenerational transmission of human capital

Janet Currie 19 July 2008

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When economists think of “human capital,” they usually mean education. Investments in education pay off in the form of higher future earnings and many other positive outcomes. But what determines a child’s educational success? Health may play a major role. Moreover, health is implicated in the intergenerational transmission of socioeconomic status: Low parental socioeconomic status may lead to poor child health, which in turn can lead to lower education and earnings for the child. These links suggests that policies intended to improve the health of mothers and their children could help to break the cycle of poverty.

The health implications of socioeconomic status

There are many reasons why parental socioeconomic status matters for child health. Richer families can purchase more and better quality health “inputs”. And better off parents may be able to combine given health inputs more productively. Third, children of lower socioeconomic status families have lower endowments of human capital at birth. These differences are not necessarily genetic. The “fetal origins hypothesis” originated by David Barker suggests that conditions in utero have lasting effects on health in later life. Thus, low socioeconomic status children may have poor endowments at birth because of circumstances, rather than because their parents have “inferior” genetic endowments. As James Heckman emphasises, there is also a dynamic aspect to the relationship between socioeconomic status and “capacity formation”. Investments in child human capital in the current period are likely to be more productive when investments have been made in previous periods.

Given this framework, it is alarming that the children of poor or less educated parents are in worse health on average than other children, even in a rich country like the United States (see for example, Currie and Lin 2007). But this observation does not necessarily imply that low socioeconomic status causes poor child health. It is possible, for example, that a third factor causes both poverty and poor child health.

One way to show a causal link between parental status and child health is to see whether changes in parental socioeconomic status improve child health. The great expansion of higher education facilities in the 1960s and 1970s, in the form of new college openings, increased college attendance amongst American women, and hence the availability of colleges at the county level can be used as an instrument for education.

Following this strategy, Enrico Moretti and I show that higher rates of college enrolment improve infant health, increase the probability that a new mother is married and that she uses prenatal care, and substantially reduce smoking during pregnancy. A similar study using data from the National Longitudinal Survey of Youth (see Carneiro, Meghir and Parey 2007) uses local labour market conditions and college location as instruments for maternal education and finds effects on cognitive outcomes and behavioural problems. They conclude that the effects of increases in maternal education are large relative to the effects of other interventions designed to affect child outcomes.

It is harder to demonstrate that changes in family income improve child outcomes because most changes in household income are endogenous. Yet there is evidence that changes in family income have profound effects on child outcomes: One study examines California mothers who were sisters and finds that if one sister was born into a poor area and the other was not, the disadvantaged sister is more likely to have a low birth weight baby. Another study that uses expansions of the U.S. Earned Income Tax Credit as exogenous changes in income finds significant effects on children’s test scores (see Currie and Moretti 2007; and Dahl and Lochner 2005). An extraordinary historical study tracks a cohort of 14,000 randomly chosen Dutch people born before 1912 up to 2000. Compared to people who were in utero during a recession, those who were in utero just before a recession suffer seven percent lower mortality (see Van den Berg, Lindeboom, and Portrait).

A cycle of poverty

So far, the discussion has focused on the relationship between parental socioeconomic status and child health. But to get a cycle, it must also be the case that child health affects the child’s future socioeconomic status. The strongest evidence on this point comes from recent studies examining the link between health in utero and future outcomes. Douglas Almond uses U.S. Census data to follow cohorts in utero during the influenza epidemic of 1918, which affected a third of women of child-bearing age. He shows that, compared to cohorts in utero either just before or just after the epidemic, affected cohorts were 15% less likely to graduate from high school and that wages of affected men were lowered by 5 to 9%. Moreover, affected individuals were more likely to be poor and receiving transfer payments, and more likely to be too disabled to work. These are very large effects! A more recent study shows that the Chernobyl disaster, which sent a “low dose” radioactive cloud over Sweden in April 1986, also had dramatic effects on children in utero at that time. Children who were at 8 to 25 weeks gestation at the time the cloud came were 3.6% less likely to qualify for high school and had 5% lower grades than children in utero just before (see Almond, Edlund, and Palme 2006).

Another way to examine the effects of health shocks in utero is to focus on birth weight, which can be thought of as a summary measure of the infant’s health at birth. Since birth weight has been recorded reliably in birth records in many countries for many years, it is possible to draw large samples of infant siblings or twins from birth records, and link their birth weights to administrative records on outcomes from other sources. Studies using this technique have now been conducted in a wide range of countries including Scotland, Norway, Canada, and the U.S. and all show a link between lower birth weight and lower educational attainment (see Lawlor et al. 2006; Black, Devereux and Salvanes 2007; Oreopolous et al. 2008; Currie and Moretti 2007). A study using a smaller sample from the Panel Study of Income Dynamics also finds large effects of low birth weight (birth weight less than 2500 grams) on annual earnings—compared to their sibling, low birth weight children have earnings that are 17.5% lower in young adulthood (see Johnson and Schoeni 2007).

We currently know little about the causal effects of long term effects of health shocks after birth. It is clear that there is a correlation between poor health in childhood and poorer adult prospects: The British cohort studies allow children to be followed from birth into adulthood and children with chronic conditions, for example, have lower educational attainment even conditional on their birth weight. Moreover, in the Panel Study of Income Dynamics, young adults who retrospectively say that they suffered poor health in childhood tend to have lower earnings than siblings who do not report poor childhood health (see Case, Fertig, and Paxson 2005;Smith 2007).

Breaking the cycle

Clearly, we should take the well-documented long-term effects of poor health at birth as a lower bound on the total effect of disparities in child health on adult well-being. Even in rich countries, poor health in childhood may be an important contributor to disparities in educational attainment and adult earnings. More work is needed to quantify the negative long-term effects of the extra burden of ill health faced by poor children. In the meantime, the evidence linking health in utero to future outcomes is overwhelming and suggests a provocative conclusion: One of the surest ways to improve child health and break the intergenerational cycle of poverty may be to improve the health and well-being of the young women who will bear the next generation.

References

Almond, Douglas. “Is the 1918 Influenza Pandemic Over? Long-term Effects of In Utero Influenza Exposure in the Post-1940 U.S. Population,” Journal of Political Economy, 114, August 2006: 672-712.

Almond, Doug, Lena Edlund, and Martin Palme. “Chernobyl’s Subclinical Legacy: Prenatal Exposure to Radioactive Fallout and School Outcomes in Sweden,” NBER Working Paper, September 2007.

Barker, D.J.P. 1998. Mothers, Babies and Health in Later Life. 2d ed. Edinburgh, UK: Churchill Livingston.

Black, Sandra E., Paul J. Devereux, and Kjells G. Salvanes. “From the cradle to the labor market? The effect of birth weight on adult outcomes,” Quarterly Journal of Economics, 2007.

Carneiro, Pedro, Costas Meghir, and Matthias Parey. “Maternal Education, Home Environments and the Development of Children and Adolescents,” (London: Institute of Fiscal Studies) Working Paper #15/07. September 2007.

Case, Anne, Angela Fertig and Christina Paxson. “The lasting impact of childhood health and circumstance,” Journal of Health Economics, March 2005.

Currie, Janet and Wanchuan Lin. “Chipping Away at Health: More on the Relationship Between Income and Child Health,” Health Affairs, 26 #2, Mar/Apr 2007, 331-344.

Currie, Janet and Enrico Moretti. “Mother’s Education and the Intergenerational Transmission of Human Capital: Evidence from College Openings,” Quarterly Journal of Economics, VCXVIII #4, Nov. 2003, 1495-1532.

Currie, Janet and Enrico Moretti, "Biology as Destiny? Short and Long-Run Determinants of Intergenerational Transmission of Birth Weight," Journal of Labor Economics, April 2007.

Dahl, Gordon and Lance Lochner. “The Impact of Family Income on Child Achievement,” NBER Working Paper #11279, April 2005.

Heckman, James J. “The Technology and Neuroscience of Capacity Formation,” Proceedings of the National Academy of Sciences (PNAS), 104 #33, August 8, 2007: 13250-13255.

Johnson, Rucker C., and Robert F. Schoeni, "The Influence of Early-Life Events on Human Capital, Health Status, and Labor Market Outcomes Over the Life Course," Institute for Research on Labor and Employment. Population Studies Center Research Report 07-616, January 2, 2007.

Lawlor, Debbie, Heather Clark, George Davey Smith, and David Leon. “Intrauterine Growth and Intelligence Within Sibling Pairs: Findings from the Aberdeen Children of the 1950s Cohort,” Pediatrics, 117 #5, May 2006: 894-902.

Oreopoulos, Phillip, Mark Stabile, Randy Walld, and Leslie Roos. 2008. Short, medium, and long term consequences of poor infant health: An analysis using siblings and twins. Journal of Human Resources, v43 n1 p88-138.

Smith, James P. “The Impact of Social Economic Status on Health over the Life Course,” Journal of Human Resources, 42 #4, Fall 2007: 739-764.

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Topics:  Health economics Poverty and income inequality

Tags:  human capital, socioeconomic status, maternal education, poverty trap, child health

Henry Putnam Professor of Economics and Public Affairs, Princeton University