Spillover effects of natural disasters on human capital

Abstract

The 1988 earthquake in Nepal took 721 lives, demolished over 105,000 buildings, and affected almost half a million people. We evaluate the long-term impact of an older sibling’s exposure to the 1988 earthquake during infancy on the human capital of younger siblings born at least three years after the event. Using the quasi-random spatial and temporal nature of ground tremors, we show that the negative effect of the earthquake on grades of schooling is twice as large among the younger siblings compared to that among the older siblings who were directly exposed to the earthquake. We find that the younger siblings of earthquake-affected infants born in areas of high seismic intensity are 29.07% less likely to complete middle school, 36.52% less likely to complete high school and attain approximately 1.74 grades of schooling less. Together, these results indicate that the economic impact of a natural disaster that ignores these spillovers on younger siblings underestimates the cost of human capital associated with large earthquakes in a developing country setting.