The e ect of Ecuador's 1998-2000 economic crisis on child health and cognitive development

In developing countries optimal instruments to smooth consumption such as insurance and credit are often scarce. Thus, during negative economic shocks, households respond by reducing consumption, and/or using sub optimal instruments to smooth consumption such as selling productive assets. If households are forced to reduce consumption or sacri ce nutritional quality during negative economic shocks, this can have detrimental e ects on children's health and cognitive development. The impact of negative economic shocks is exacerbated if governments cannot adequately respond to the shock and instead are forced to reduce public spending. My goal is to investigate the impact of the 1998-2000 Ecuadorian crisis on children's health and cognitive outcomes. The 1998-2000 Ecuadorian crisis was triggered by the El Niño phenomenon, a drop in oil prices, and the international nancial crisis. These three events led to a banking and nancial crisis within Ecuador that caused prices to increase dramatically and public spending to decrease. While many reports show that consumption fell and poverty increased during the crisis, there is little information on how children's health and cognitive outcomes were a ected. From a policy perspective this is important not only because we care about child outcomes in their own right but also because worse health and cognitive outcomes early in life lead to worse education and labor outcomes later in life [Maluccio et al., 2006, Glewwe and Jacoby, 1995, Glewwe et al., 2001]. Thus, it is important to understand how children are a ected during economic crises and nd ways to mitigate the impact. The possible mechanisms through which the crisis impacted a child's development are through a deterioration of the health environment (due to decreased public spending and El Niño); a reduction in the consumption of normal goods such as food, health services and early childhood stimulation; and a change in parents time spent on the care of their children. The direction of the change in parent's time is ambiguous because on the one hand a reduction in current income may lead to a reduction in the opportunity cost of time, and therefore, to parents spending more time with their children [Miller and Urdinola, 2007]. On the other hand, a reduction in current income may lead to distress work and an increase in the labor participation of secondary workers (often mothers)[Bhalotra, 2009]. While disentangling these e ects is beyond the scope ∗Ph.D. Candidate, Department of Agricultural and Resource Economics, University of California, Berkeley. Email: [email protected]