Household income dynamics and investment in children: Evidence from India

Abstract

Household income shocks in developing countries are known to have an impact on the education investments for children. In this paper, we explore the effects of various income and expenditure shocks on educational investment and cognitive outcomes of children using three rounds of household-level panel data from Young Lives survey conducted in two southern states of India – Andhra Pradesh and Telangana. We find that idiosyncratic shocks like paternal health shocks and livestock loss translate into lower inputs of children’s education, which reduce their cognitive ability captured through vocabulary and mathematics tests.

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