Subsistence Crises and Human Capital Accumulation

A large amount of literature deals with the implication of malnutrition or famines. Ex-cellent literature on this topic are, for instance, the survey by Ó'Gráda (2007), the works edited by Dyson and Ó'Gráda (2002), or Drèze and Sen (1991). Chronic malnutrition increases mortality, directly through starvation, but also via nutrition related diseases.

Additionally, fertility and marriages decrease, while migration increases. This paper, however, scrutinizes mainly the impact of subsistence crises on human capital, a link which has been disregarded so far. Subsistence crises are dened here as a substantial increase in wheat prices originated by bad harvests, wars or distribution problems that cause undernourishment and therefore higher mortality.

Should subsistence crises inuence human capital? It seems quite intuitive to assume that the level of schooling in a population will decline in the presence of a subsistence crisis. This may be due to parents not having the ability to aord schooling fees or children have to work. When families are concerned with making ends meet, education loses its immediate importance. Essentially, the opportunity costs of sending children to school will rise and be higher than expected gains from education in the future. In the past, economic crises (subsistence crises are interpreted here as a form of economic crisis) have been frequently associated with a decline in human capital accumulation. In the following, we will focus on two explanations concerning the impact of subsistence crises on human capital formation. The rst considers the link between subsistence crises and the amount of schooling, the second focuses on cognitive abilities which are hampered through malnutrition.

5.2.1 Subsistence Crises and the Amount of Schooling

The education choices of households in the presence of transitory shocks (idiosyncratic shocks like parental unemployment or macroeconomic crises like crop failure) may oper-ate in various ways. Theoretical models of child labor like the one presented by Baland and Robinson (2000) assume implicitly that child labor gives rise to a trade-o between

current and future earnings. A negative income shock leads to a drop in family income.

In the presence of imperfect capital markets, child labor supply will rise to compensate for this decline. Thus, parents use child labor to smooth consumption during transitory shocks (Edmonds 2004, Jensen 2000). This leads to a decline in school attainment and a subsequent decrease in human capital accumulation (Jacoby and Skouas 1997). Empir-ical evidence exists on South East Asian and Mexico (Fallon and Lucas 2002), Indonesia (Thomas et al. 2004), Argentina (Rucci 2003), and Cote d'Ivoire (Jensen 2000). Dureyaa, Lam, and Levison (2006) examined the relationship between household shocks and child employment in six Brazilian cities during the 1980s and 1990s. Economic shocks in terms of short-term unemployment of the father increase the probability that the children leave school and enter the labor force themselves or that they fail to advance in school. But transitory shocks may also cause schooling interruption, as Sawada (2003) points out. Fur-ther, he argues that the response to transitory shocks may be stronger than to permanent shocks.

Income uncertainty caused by frequent crop shocks can also lead to the result that children never enroll in school. Drawing on the case of Burkina Faso, Kazianga (2005) explains that volatile income streams induce households to build up a buer stock in order to protect against potential income shortfalls. Thus, even before short term shocks arise, households choose not to send their children to school.

But the eect of macroeconomic shocks can be ambiguous. As wages decrease during crises, wages for children also fall and therefore lower the opportunity costs of schooling.

On the other hand, increases in the marginal utility of the children's wage with decreas-ing family income may lead to increasdecreas-ing child labor and decreasdecreas-ing schooldecreas-ing (Schady 2004, Ferreira and Schady 2008). Increasing school enrollment or school eorts during macroeconomic crises are more likely to be found during longer economic crises and in richer countries (Ferreira and Schady 2008). Following this argument, Goldin (1999) nds increasing secondary enrollment in the United States during the Great Depression.

In poorer countries, however, education decreases at least temporary.

Stagnating education during shocks is not restricted only to today's developing

coun-tries. Dramatic changes in social and economic settings of the past have been linked to stagnating education (Cipolla 1969, Sanderson 1972, Mitch 1992). In late 18^th and 19^th centuries Leicester, industrialization relied heavily on child and women labor, prevent-ing the latter from teachprevent-ing their children. The opportunity costs of sendprevent-ing children to school rose and the educational level of the population declined, as suggested by a higher share of grooms and brides that signed the marriage registers with a cross than in the periods before industrialization started (Brown 2004).

Deteriorating levels of literacy might also be associated with a lower supply of education as a consequence of lower public funds. In a similar vein, social and political struggle can undermine supply and/or demand for education (Cressy 1977).

5.2.2 Malnutrition and Cognitive Abilities

In development economics, nutritional intake and health are important factors in explain-ing educational outcomes (Pollitt 1990). Malnutrition leads to a poorer health status, a higher susceptibility to disease, and therefore higher absenteeism from school (Behrman 2004). It also diminishes attentiveness (Galler et al. 1983). Therefore, previously mal-nourished children present frequently worse school outcomes than their better mal-nourished peers (Galler et al. 1990). Further, Glewwe, Jacoby, and King (2001) present evidence for the assumption that better nourished children enroll earlier in school. Thus, malnourished children receive less education.

Nutrition is also a basic requirement for brain development. Protein and micronu-trients are essential for cognitive abilities. Three main deciencies are commonly ac-cepted to have a negative impact on children's cognitive abilities: protein-energy, iron, and iodine. These deciencies irreversibly aect brain development, learning, and be-havior (Scrimshaw 1998). Several studies emphasize the link between nutrition and cog-nitive abilities, measured by IQ scores, for developing countries (Miller del Rosso and Marek 1996, Glewwe, Jacoby, and King 2001). Although Behrman (1996) has empha-sized diculties assessing the impact of malnutrition on brain development, they agree that early childhood malnutrition as well as infants born to undernourished mothers,

present lower cognitive abilities than well nourished children. Gorman and Pollitt (1992) nd, for instance, that low weight at birth is associated with retarded cognitive develop-ment. Grantham-McGregor and Cumper (1992) study Jamaican children and conclude that early childhood malnutrition is associated with poor school achievements later in life. In a study for Mexico, Cravioto and De Licardie (1975) could show that protein-energy deciencies give rise to lower intelligence quotients of children who experienced early childhood malnutrition, even after controlling for dierences in their psycho-social environment. A study in Nepal has shown that after income, measured as rice and wheat output, the most signicant determinant of child enrollment was body size (Mook and Leslie 1986), which is also aected by the nutritional status. Following this research line, Baten, Crayen, and Voth (2007) nd that low nutritional levels hampered cognitive ability in industrializing England. Especially the early childhood period, which is the period of rapid brain development, is crucial in this respect (Bryan et al. 2004).

Childhood malnutrition from exposure to the Great Chinese Famine (1959-1961) heav-ily reduced the health status of the survivors. Meng and Qian (2006) show that this had a signicant negative eect on labor supply. They also conclude that educational attainment decreased during this time.

To sum the ndings of prolic studies, malnutrition is found to come along with poor cognitive development, lower intelligence (measured by IQ scores or school performance) and poor social and emotional development.⁴ Thus, 'children's nutritional intakes must be above a certain threshold to enable them to fully benet from school education' (Bhargava 2001).

4See Pollitt et al. (1996) for a detailed overview and Barett, Radke-Yarrow, and Klein (1983) on the emotional and social development of malnourished children.

5.3 The Spanish Subsistence Crises and their Impact on