The Causal Effect of an Income Shock on Children’s Human Capital

Produced by: 
Barcelona Graduate School of Economics
Available from: 
July 2021
Paper author(s): 
Cristina Borra
Ana Costa-Ramon
Libertad Gonzalez
Almudena Sevilla
Topic: 
Education - Health
Year: 
2021

We investigate the causal impact of a generous unconditional cash transfer at birth on children's later health outcomes and academic performance. Using rich administrative data, we take advantage of the unexpected introduction of a “baby bonus” in Spain in 2007, and implement a difference-in-discontinuity approach comparing children born in the surrounding months in different years. We find that the subsidy did not have a significant effect on health outcomes during childhood, nor on test scores in primary school. In line with this result, we show that the benefit did not affect the main potential mechanisms that could in turn have affected children’s health and academic performance. Our results contribute to understanding which interventions are effective at improving children's health and human capital formation.

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Research section: 
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