Abstract
A small but increasing body of literature finds that parents invest in their children unequally. However, the evidence is contradictory, and providing convincing causal evidence of the effect of child ability on parental investment in a low-income context is challenging. This paper examines how parents respond to the differing abilities of primary school-aged Ethiopian siblings, using rainfall shocks during the critical developmental period between pregnancy and the first 3 years of a child’s life to isolate exogenous variations in child ability within the household, observed at a later stage than birth. The results show that on average parents attempt to compensate disadvantaged children through increased cognitive investment. The effect is significant, but small in magnitude: parents provide about 3.9% of a standard deviation more in educational fees to the lower-ability child in the observed pair. We provide suggestive evidence that families with educated mothers, smaller household size and higher wealth compensate with greater cognitive resources for a lower-ability child.
Highlights
A large body of evidence has developed during the past three decades showing that in utero and early life conditions have a significant impact on children’s early life ability, subsequent development and on outcomes in adulthood (surveyed by Currie and Almond (2011) and Almond et al (2018))
In all of the estimation results, total educational fees paid for each child is the proxy for cognitive resources, while Peabody Picture Vocabulary Test (PPVT) scores are the proxy for cognitive ability
We find that children are vulnerable at the age of 0 to 24 months in developing cognitive ability in Ethiopia, which is consistent with the findings of Maccini and Yang (2009), though Dercon and Porter (2014) find children exposed to famine at the age of 12 to 36 months are shorter than their peers in Ethiopia
Summary
A large body of evidence has developed during the past three decades showing that in utero and early life conditions have a significant impact on children’s early life ability, subsequent development and on outcomes in adulthood (surveyed by Currie and Almond (2011) and Almond et al (2018)). Ayalew (2005) finds reinforcing effects, but these results are based on estimates from only one village in Ethiopia.1 We use both sibling fixed-effects and a plausibly exogenous source instrument (rainfall in early life) for variation in cognitive ability to more convincingly identify parental responses, rather than relying on within-twin estimation, since twins are not the ideal group on which to study such effects (Bhalotra and Clarke 2018). There is an extremely careful literature that has analysed whether parents compensate or reinforce specific (plausibly exogenous) policies and events experienced in childhood (Halla et al 2014; Adhvaryu and Nyshadham 2016), which is highly informative, but may only be generalisable to larger policy shocks, whereas our use of variation in rainfall could be seen as ‘normal’ shocks to childhood experienced by children in low-income countries (Maccini and Yang 2009). We briefly review the relevant literature, and in subsequent sections present our data, including the cognitive ability measures, followed by our econometric approach, our results and robustness checks and a concluding discussion
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