Dynamic complementarities in infant health

2017

A large literature documents that early-life shocks may substantially affect health and

labor market outcomes. However, we do not know much about how different shocks

interact. In theoretical work, the idea of dynamic complementarities has been put

forward, implying that the effect of a positive shock is larger for individuals with a

higher baseline level of skills. With dynamic complementarities, negative shocks decrease

the returns to subsequent investments for affected children. In this setting, universal

interventions may in reality serve to strengthen initial differences. The policy

relevance of understanding whether dynamic complementarities exist can therefore

hardly be underestimated, but no clear answer has yet emerged from the literature. I

utilize two arguably exogenous sources of variation in infant health in Norway between

1935 and 1945 to shed light on this question. The first shock is fetal exposure

to seasonal influenza, which has been shown to negatively affect long-term health

and labor market outcomes. The second shock is access to well-child visits, which

is known to improve similar outcomes. Specifically, I ask whether fetal exposure to

influenza reduces the long-term returns to mother and child health care centers. This

is a particularly relevant question for policy-making because seasonal influenza is a

frequent shock, yet easily preventable by means of vaccination. If influenza lowers

the returns to a universal intervention like mother and child health care centers, inequality

of opportunity could therefore be reduced by increasing vaccination rates

among pregnant women. Using detailed individual-level registry data, I find little

evidence of influenza affecting the educational or labor market returns to well-child

visits. This lack of significant interaction effects could however be driven by the

two shocks not affecting the outcomes of interest in my sample. Further research is

therefore necessary in order to understand whether returns to mother and child health

care centers are lower for infants who were exposed to maternal influenza.