Newborns during the crisis: Evidence from the 1980s′ farm crisis

Abstract

The sudden and jumping interest rate in the early 1980s triggered a severe economic crisis in the US agriculture sector. To identify the effects of wealth losses on the health condition of cohorts born in the midst of the crisis, this paper constructs an instrumental variable for wealth by exploiting the geographic variation in crop production and the timing of the shock. This study finds that wealth losses generates long‐lasting health impacts for these newborns. A one percent wealth loss leads to an approximately 0.008 and 0.003 percentage point increase in the low and very low birth weight rates, respectively. In addition, cohorts growing up in areas of greater impacts have worse self‐reported health condition before age 17 than others. They also have more metabolic‐syndrome issues and smoke more regularly than other cohorts in adulthood. Lower expenditures on food and prenatal care might explain the negative health effects on cohorts born during the crisis. The study shows that households in areas with greater wealth losses have more declining expenditures on food at home and prenatal‐care doctor visits.