Paper #1789

Title:

The causal effect of an income shock on children’s human capital

Authors:

Cristina Borra, Ana Costa-Ramón, Libertad González Luna and Almudena Sevilla

Date:

July 2021

Abstract:

We investigate the causal impact of a generous unconditional cash transfer at birth on children's later health outcomes and academic performance. Using rich administrative data, we take advantage of the unexpected introduction of a "baby bonus" in Spain in 2007, and implement a difference-in-discontinuity approach comparing children born in the surrounding months in different years. We find that the subsidy did not have a significant effect on health outcomes during childhood, nor on test scores in primary school. In line with this result, we show that the benefit did not affect the main potential mechanisms that could in turn have affected children's health and academic performance. Our results contribute to understanding which interventions are effective at improving children's health and human capital formation.

Keywords:

children, health, education, income shock, Child benefit, Spain

JEL codes:

I12, J13, H31, H24

Area of Research:

Labour, Public, Development and Health Economics

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