IDEAS home Printed from https://ideas.repec.org/a/spr/izaldv/v6y2017i1d10.1186_s40175-016-0068-4.html
   My bibliography  Save this article

Childhood health and educational investment under risk

Author

Listed:
  • Neha Kumra

    (Government of India)

Abstract

A huge literature shows that childhood health and educational attainment are highly correlated. However, estimates for the effect of childhood health on educational attainment under risk generally confound the effect of liquidity constraints and of lack of insurance against risk. It is unclear whether the correlation between health and education under uninsured risk would remain if the capital markets were perfect and household faced no liquidity constraints. This paper fills in this lacuna in the literature. We develop a two period model of investment in education when future labor earnings are stochastically dependent on current investments in schooling and health. It is found that when there is uninsured risk, then parental investment in a child’s education will be inefficient even in the presence of perfect capital markets. Under certain assumptions, there will be a positive correlation between childhood health and educational investment. Health inequalities will translate into educational inequalities in an environment of uninsured risk. We are able to show that when perfect insurance markets are present, investments in child health and schooling will be optimal. From the policy perspective, this argues for the development of insurance markets. The results also suggest that policy interventions that target higher levels of educational investment among the population need to account for the effect of childhood differences in health.

Suggested Citation

  • Neha Kumra, 2017. "Childhood health and educational investment under risk," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-22, December.
    • Handle: RePEc:spr:izaldv:v:6:y:2017:i:1:d:10.1186_s40175-016-0068-4
    DOI: 10.1186/s40175-016-0068-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s40175-016-0068-4
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1186/s40175-016-0068-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Becker, Gary S, 1974. "A Theory of Social Interactions," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1063-1093, Nov.-Dec..
    2. Chang, Fwu-Ranq, 1996. "Uncertainty and investment in health," Journal of Health Economics, Elsevier, vol. 15(3), pages 369-376, June.
    3. Linda N. Edwards & Michael Grossman, 1977. "An Economic Analysis of Children's Health and Intellectual Development," NBER Working Papers 0180, National Bureau of Economic Research, Inc.
    4. Cropper, M L, 1977. "Health, Investment in Health, and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1273-1294, December.
    5. Li Gan & Guan Gong, 2004. "Mortality Risk and Educational Attainment of Black and White Men," NBER Working Papers 10381, National Bureau of Economic Research, Inc.
    6. Selden, Thomas M., 1993. "Uncertainty and health care spending by the poor: The health capital model revisited," Journal of Health Economics, Elsevier, vol. 12(1), pages 109-115, April.
    7. Victor R. Fuchs, 1982. "Economic Aspects of Health," NBER Books, National Bureau of Economic Research, Inc, number fuch82-1, July.
    8. Hanan G. Jacoby & Emmanuel Skoufias, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(3), pages 311-335.
    9. Perri, Timothy J., 1984. "Health status and schooling decisions of young men," Economics of Education Review, Elsevier, vol. 3(3), pages 207-213, June.
    10. Kenkel, Donald S, 1991. "Health Behavior, Health Knowledge, and Schooling," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 287-305, April.
    11. Dardanoni, Valentino & Wagstaff, Adam, 1990. "Uncertainty and the demand for medical care," Journal of Health Economics, Elsevier, vol. 9(1), pages 23-38, June.
    12. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-255, March-Apr.
    13. Rosemary Hyson & Janet Currie, 1999. "Is the Impact of Health Shocks Cushioned by Socioeconomic Status? The Case of Low Birthweight," American Economic Review, American Economic Association, vol. 89(2), pages 245-250, May.
    14. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-963, December.
    15. Victor R. Fuchs, 1982. "Time Preference and Health: An Exploratory Study," NBER Chapters, in: Economic Aspects of Health, pages 93-120, National Bureau of Economic Research, Inc.
    16. Dardanoni, Valentino & Wagstaff, Adam, 1987. "Uncertainty, inequalities in health and the demand for health," Journal of Health Economics, Elsevier, vol. 6(4), pages 283-290, December.
    17. Muurinen, Jaana-Marja, 1982. "Demand for health: A generalised Grossman model," Journal of Health Economics, Elsevier, vol. 1(1), pages 5-28, May.
    18. Michael Grossman, 1972. "The Demand for Health: A Theoretical and Empirical Investigation," NBER Books, National Bureau of Economic Research, Inc, number gros72-1, July.
    19. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 12, pages 697-812, Elsevier.
    20. Li Gan & Guan Gong, 2007. "Estimating Interdependence Between Health and Education in a Dynamic Model," NBER Working Papers 12830, National Bureau of Economic Research, Inc.
    21. Harold Alderman & Jere R. Behrman & Victor Lavy & Rekha Menon, 2001. "Child Health and School Enrollment: A Longitudinal Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 36(1), pages 185-205.
    22. Fuchs, Victor R. (ed.), 1982. "Economic Aspects of Health," National Bureau of Economic Research Books, University of Chicago Press, number 9780226267852, November.
    23. Mark R. Rosenzweig & T. Paul Schultz, 1991. "Who Receives Medical Care?: Income, Implicit Prices, and the Distribution of Medical Services among Pregnant Women in the United States," Journal of Human Resources, University of Wisconsin Press, vol. 26(3), pages 473-508.
    24. Michael Grossman, 1999. "The Human Capital Model of the Demand for Health," NBER Working Papers 7078, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Grossman, 1999. "The Human Capital Model of the Demand for Health," NBER Working Papers 7078, National Bureau of Economic Research, Inc.
    2. Lairson, David R. & Chan, Wenyaw & Newmark, Georgina R., 2005. "Determinants of the demand for breast cancer screening among women veterans in the United States," Social Science & Medicine, Elsevier, vol. 61(7), pages 1608-1617, October.
    3. Bolin, Kristian & Lindgren, Björn, 2016. "Non-monotonic health behaviours – implications for individual health-related behaviour in a demand-for-health framework," Journal of Health Economics, Elsevier, vol. 50(C), pages 9-26.
    4. Grimard, Franque & Parent, Daniel, 2007. "Education and smoking: Were Vietnam war draft avoiders also more likely to avoid smoking?," Journal of Health Economics, Elsevier, vol. 26(5), pages 896-926, September.
    5. Bolin, Kristian & Liljas, Bengt & Lindgren, Björn, 2014. "Individual technologies for health - the implications of distinguishing between the ability to produce health investments and the capacity to benefit from those investments," Working Papers in Economics 587, University of Gothenburg, Department of Economics.
    6. Adriana Lleras-Muney, 2005. "The Relationship Between Education and Adult Mortality in the United States," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 189-221.
    7. Bolin, Kristian & Lindgren, Björn, 2014. "Non-monotonic health behaviours - implications for individual health-related behaviour in a demand-for-health framework," Working Papers in Economics 588, University of Gothenburg, Department of Economics.
    8. repec:pri:cheawb:llerasmuney1 is not listed on IDEAS
    9. Bolin, Kristian & Jacobson, Lena & Lindgren, Bjorn, 2002. "Employer investments in employee health: Implications for the family as health producer," Journal of Health Economics, Elsevier, vol. 21(4), pages 563-583, July.
    10. Jacobson, Lena, 2000. "The family as producer of health -- an extended grossman model," Journal of Health Economics, Elsevier, vol. 19(5), pages 611-637, September.
    11. Grossman, Michael, 2006. "Education and Nonmarket Outcomes," Handbook of the Economics of Education, in: Erik Hanushek & F. Welch (ed.), Handbook of the Economics of Education, edition 1, volume 1, chapter 10, pages 577-633, Elsevier.
    12. Kristian Bolin & Bjorn Lindgren, 2012. "The Double Facetted Nature of Health Investments - Implications for Equilibrium and Stability in a Demand-for-Health Framework," NBER Working Papers 17789, National Bureau of Economic Research, Inc.
    13. Lurås, Hilde, 2009. "A healthy lifestyle: The product of opportunities and preferences," HERO Online Working Paper Series 2001:11, University of Oslo, Health Economics Research Programme.
    14. Gilleskie, Donna B. & Harrison, Amy L., 1998. "The effect of endogenous health inputs on the relationship between health and education," Economics of Education Review, Elsevier, vol. 17(3), pages 279-295, June.
    15. Carman, K.G. & Kooreman, P., 2010. "Flu Shots, Mammogram, and the Perception of Probabilities," Other publications TiSEM fba970b8-6fc7-449b-acf9-9, Tilburg University, School of Economics and Management.
    16. Juergen Jung & Chung Tran, 2010. "Medical Consumption over the Life Cycle: Facts from a U.S. Medical Expenditure Panel Survey," Working Papers 2010-09, Towson University, Department of Economics, revised Mar 2013.
    17. Strulik, Holger, 2015. "Frailty, mortality, and the demand for medical care," The Journal of the Economics of Ageing, Elsevier, vol. 6(C), pages 5-12.
    18. Dewar, Diane M., 1998. "Do those with more formal education have better health insurance opportunities?," Economics of Education Review, Elsevier, vol. 17(3), pages 267-277, June.
    19. Roman Hoffmann & Sebastian Uljas Lutz, 2019. "The health knowledge mechanism: evidence on the link between education and health lifestyle in the Philippines," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(1), pages 27-43, February.
    20. Grossman, Michael, 2004. "The demand for health, 30 years later: a very personal retrospective and prospective reflection," Journal of Health Economics, Elsevier, vol. 23(4), pages 629-636, July.
    21. Katherine Carman & Peter Kooreman, 2014. "Probability perceptions and preventive health care," Journal of Risk and Uncertainty, Springer, vol. 49(1), pages 43-71, August.

    More about this item

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:izaldv:v:6:y:2017:i:1:d:10.1186_s40175-016-0068-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.