Association Between Parental Resources and Child Development in Peru From  Parent to Child Association Between Parental Resources and Child Development in Peru Milo Vandemoortele DSA Conference November, 2013

Overarching Research Question How and to what extent are parental resources associated with child development? A case study of Peru

Why do research on this topic? A “conservative estimate that more than 200 million children under 5 years fail to reach their potential in cognitive development because of poverty…” and its attendant problems.1 Long term consequences2 Poor children are more likely to remain poor Limited research on the topic 1 Grantham-McGregor et al., 2007:60; 2 Walker et al., 2011

Research Questions How and to what extent are parental resources associated with child development? Particularly focusing on: Parental resources at birth and each subsequent stages of life Changes in parental resources Differential effect of parental wealth versus parental expenditure Shape of the association – is it linear? Does the effect of parental resources differ for poorer children versus wealthier children

Analytical Framework Source: Adapted from Haveman and Wolfe (1995), Grantham-McGregor et al. (2007)

Data: Young Lives Four countries: Ethiopia, Andhra Pradesh (India), Peru and Vietnam Total sample of 12,000 children followed over a period of 15 years Sample size used here, younger cohort in Peru ~2000 children born in 2001/02 Three survey rounds (birth, 5/6 yrs and 7/8 yrs) Extremely low attrition rates (7% in Peru) Limitations

Analytic Approach Models Challenge: Omitted variable bias and endogeniety leads to biased estimates Several approaches available to address this Latent Trait Modeling to recalculate the wealth index Models 1) OLS with Community Fixed Effects 2) Spline with Community Fixed Effects 3) Child Level Fixed Effects (First-Differences)

Control Variables Child specific: Household level: gender race/ethnicity birth weight chronic health problems stunting age subjective socio-economic status (at age 7/8 yrs) Household level: siblings caregivers level of education proxies for household non-cognitive environment: maternal depression caregiver’s educational aspirations of child negative child rearing experience network/social capital main language spoken at home

Model 1: OLS with Community Fixed Effects 𝑆 𝑖𝑗,𝑡 𝐶 = 𝑎 0 + 𝑛=0 2 𝛽 𝑛 log(𝑌) 𝑖𝑗,𝑡−𝑛 + 𝑛=0 2 𝜏 𝑛 W 𝑖𝑗,𝑡−𝑛 + 𝑘=1 𝐾 𝜆 𝑘 𝑥 𝑖𝑗𝑡 𝑘 + 𝛼 𝑗 + 𝑙=1 𝐿 𝛾 𝑙 𝑦 𝑖𝑗𝑡 𝑙 + 𝜇 𝑖𝑗,𝑡 1 Where: 𝑆 𝑖𝑗,𝑡 𝐶 is the cognitive outcome observed in Round 𝑡 for child 𝑖 in community 𝑗 log(𝑌) 𝑖𝑗,𝑡−𝑛 is expenditure (logged) in Round 𝑡−𝑛 (𝑛=0,2) W 𝑖𝑗,𝑡−𝑛 is household wealth 𝑥 𝑖𝑗𝑡 𝑘 are observed child-level factors, where there are 𝐾 number of variables (𝑘=1,𝐾) 𝛼 𝑗 represents the community fixed effects. 𝑦 𝑖𝑗𝑡 𝑙 are the unobserved exogenous factors affecting child development, where L is the number of variables (𝑙=1, 𝐿). 𝜇 𝑖𝑗𝑡 1 captures measurement error 

Model 2: Spline with Community FE Are there non-linear effects? A prototypical model is represented as follows: 𝑆 𝑖𝑗𝑡 𝐶 = 𝑎 0 + 𝑛=0 2 𝑠(log(𝑌) 𝑖𝑗,𝑡−𝑛 ) + 𝑛=0 2 𝑠( W 𝑖𝑗,𝑡−𝑛 ) + 𝑘=1 𝐾 𝜆 𝑘 𝑥 𝑖𝑗𝑡 𝑘 + 𝛼 𝑗 + 𝑙=1 𝐿 𝛾 𝑙 𝑦 𝑖𝑗𝑡 𝑙 + 𝜇 𝑖𝑗𝑡 1 The only difference between Equation 2 and Equation 1 is the spline function around the household resources variables 𝑠(log(𝑌) 𝑖𝑗,𝑡−𝑛 ) and 𝑠( W 𝑖𝑗,𝑡−𝑛 )

Model 3: First-difference model Controls for differences between households and communities Allows to examine the effect of changes in parental resources on child development 𝑆 𝑖,𝑡+1 𝐶 − 𝑆 𝑖𝑡 𝐶 = 𝑎 0 + 𝑛=0 2 𝛽 𝑛 log 𝑌 𝑖,𝑡+1−𝑛 − log 𝑌 𝑖,𝑡−𝑛 ) + 𝑛=0 2 𝜏 𝑛 W 𝑖,𝑡+1−𝑛 − W 𝑖,𝑡−𝑛 + 𝛽 3 log 𝑌 𝑖,0 + 𝜏 3 𝑊 𝑖,0 + 𝛽 4 𝑛=0 2 log 𝑌 𝑖,0 ∗ log 𝑌 𝑖,𝑡+1−𝑛 − log 𝑌 𝑖,𝑡−𝑛 + 𝜏 4 𝑛=0 2 𝑊 𝑖,0 ∗ W 𝑖,𝑡+1−𝑛 − W 𝑖,𝑡−𝑛 + 𝛽 5 𝑇 𝑖 + (𝜇 𝑖,𝑡+1 1 −𝜇 𝑖,𝑡 1 ) 𝑆 𝑖𝑡 𝐶 − 𝑆 𝑖,𝑡−1 𝐶 : changes in the developmental outcome between age 5/6 yrs and 7/8 yrs

Results: OLS with Community FE (1) Consumption appears to have a positive and contemporaneous effect. Wealth too, but also a lagged effect.

Results: OLS with Community FE (2) Wealth is a better predictor of children’s math and reading skills at 7/8 yrs old than consumption.

Results: Spline with Community FE (1) The effect of wealth on vocabulary scores at age 5/6 yrs is non-linear, whereas the effect of expenditure is linear. This is differs with math scores at 5/6 yrs, where the effect of wealth and expenditure in the same time period are broadly linear.

Results: Spline and Community FE (3) With maths and reading scores at 7/8 yrs, wealth in the previous period (5/6 yrs) appears to have a nonlinear effect.

Results: First-Differences (1) Changes in expenditure between 5/6 and 7/8 years appear to benefit the poorest children more than the better off children. Vocabulary Math

Summary Consumption appears to have a contemporaneous effect, while wealth has both a contemporaneous and lagged effect on vocabulary test scores. Data on parental wealth are a better predictor of children’s maths and reading skills at 7/8 yrs old than consumption data. The assumption that wealth is linearly associated with cognitive development does not hold. A change in wealth appears to have a lagged effect, while changes in expenditure an immediate effect on both math and vocabulary test scores. This effect appears to benefit poorer children more than better off children.

Thank you! m.vandmoortele@lse.ac.uk

Mechanisms Goods inputs and under-nutrition Stunting - negative and significant effect generally Long term health problems – no significant effect Birth weight – no significant effect Time inputs / under-stimulation Caregiver’s depression – positive with reading at age 7/8 yrs Parental aspirations – positive and significance with vocabulary at age 7/8 yrs Demographic Gender - significant differences in math and vocabulary at age 7/8 yrs, but small SES Subjective SES – small, positive and significant with reading at age 7/8 yrs only

Results: First-Differences (2) Changes in wealth between birth and 5/6 yrs appears to benefit poorer children more than wealthier children in both maths and vocabulary scores. Math Vocabulary