Income Shocks Reduce Human Capital Investments : Evidence from Five East European Countries

This paper empirically investigates whether households affected by income shocks cope by reducing human capital investments. The analysis uses Crisis Response Surveys conducted in Armenia, Bulgaria, Montenegro, Romania, and Turkey during 2009 and 2010. A propensity score matching technique is adopted to compare health and education investment decisions among households that were affected by income shocks to the matched comparison group. The authors find that households affected by income shocks reduced some human capital investments. Interestingly, households in these five countries were more likely to adopt health-related coping strategies as opposed to education-related coping strategies. The results from Armenia, Bulgaria, Montenegro, and Turkey show that households affected by income shocks reduced their visits to doctors and reduced their spending on medicine and medical care significantly more than the matched comparison group. Households affected by income shocks reduced their education investments, but did not adopt harmful education-related coping strategies, such as withdrawing children from schools or moving children from costly private to cheaper public schools. These findings reveal that long-term and possibly intergenerational household welfare could be affected by short-run income shocks and hence underscore the need for governments to employ mitigation measures.

Bibliographic Details

Main Authors:	Dasgupta, Basab, Ajwad, Mohamed Ihsan
Language:	English
Published:	2011-12-01
Subjects:	ABILITY TO PAY, ADVERSE EFFECTS, AGGREGATE INCOME, BANK POLICY, BORROWING, BUDGET CONSTRAINTS, CAPITAL ACCUMULATION, CAPITAL INVESTMENT, CAPITAL INVESTMENTS, CHILD HEALTH, CREDIT MARKETS, CRISES, DENTAL CARE, DEVELOPING COUNTRY, DEVELOPING WORLD, DEVELOPMENT ECONOMICS, DEVELOPMENT OUTCOMES, DISASTERS, DOCTORS, DUMMY VARIABLE, DURABLE, DURABLE GOODS, ECONOMIC CRISES, ECONOMIC REVIEW, ECONOMIC STUDIES, ELDERLY PEOPLE, EMPIRICAL ANALYSIS, EMPIRICAL FINDINGS, EXPENDITURE, EXPENDITURES, FAMILIES, FAMILY LABOR, FINANCIAL CRISIS, FINANCIAL MARKETS, FINANCIAL SHOCK, GOVERNMENT BUDGET, HEALTH CARE, HEALTH CARE CENTERS, HEALTH CARE FACILITIES, HEALTH CARE UTILIZATION, HEALTH ECONOMICS, HEALTH EFFECTS, HEALTH EXPENDITURES, HEALTH INSURANCE, HEALTH INVESTMENTS, HEALTH OUTCOMES, HEALTH SERVICES, HOSPITALIZATION, HOUSEHOLD INCOME, HOUSEHOLD INCOMES, HOUSEHOLD SIZE, HOUSEHOLD SURVEYS, HUMAN CAPITAL, HUMAN DEVELOPMENT, INCOME, INCOME COMPONENTS, INCOME EFFECT, INCOME SHOCK, INCOME SHOCKS, INFANT MORTALITY, INFORMATION TECHNOLOGY, INFRASTRUCTURE DEVELOPMENT, INNOVATIONS, INSURANCE, INTERNATIONAL BANK, INVESTMENT DECISIONS, LABOR ECONOMICS, LABOR MARKET, LABOR SUPPLY, LIFE INSURANCE, LIVING STANDARDS, LOCAL GOVERNMENT, MARKET CONDITIONS, MEAN VALUE, MEDICAL CARE, MEDICINES, MORTALITY, MORTALITY RATES, NATURAL DISASTERS, NORMAL DISTRIBUTION, 0 HYPOTHESIS, NUTRITION, OPPORTUNITY COST, PENSION, POLICY DISCUSSIONS, POLICY IMPLICATIONS, POLICY RESEARCH, POOR HOUSEHOLDS, POST-CRISIS PERIOD, PRIMARY EDUCATION, PRIMARY HEALTH CARE, PROBABILITY, PUBLIC ECONOMICS, REMITTANCES, SAFETY, SAFETY NET, SAFETY NETS, SENSITIVITY ANALYSIS, SETTLEMENT, SIGNIFICANT DIFFERENCES, SOCIAL EXCLUSION, UNEMPLOYMENT, USE OF HEALTH SERVICES, WAGES, WITHDRAWAL, WORKING HOURS,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111229165530 https://hdl.handle.net/10986/3695
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