Economic shocks and infant health: Evidence from a trade reform in Brazil

Using a uniquely rich set of data sources spanning more than 3,000 Brazilian municipalities over a horizon of 25 years, we investigate the effects of changes in local economic conditions generated by a trade liberalization reform on infant mortality. We exploit variation in import tariff reductions, together with differences in the baseline industry composition across locations, for identification. We find that areas with greater exposure to the trade-induced economic shock experienced a larger decline in infant mortality. In our exploration of mechanisms, we find the most support for the hypothesis that worse labor market opportunities make it less costly undertake health-improving behaviors that are time intensive. Consistent with this hypothesis, we observe a significant decline in female employment rates and an increase in the use of basic health services among women of childbearing ages and infants. We also document that the rollout of a community-based intervention that brings basic health services to the home in a flexible fashion lowers the magnitude of the mortality effect, providing further evidence in favor of the parental time mechanism.