OBJECTIVE: The causal link between a household's economic standing and child health is known to suffer from endogeneity. While past studies have exemplified the causal link to be small, albeit statistically significant, this paper aims to estimate the causal effect to investigate whether the effect of income after controlling for the endogeneity remains small in the long run. By correcting for the bias, and knowing the bias direction, one can also infer about the underlying backward effect.
DESIGN AND SETTING: This paper uses an instrument variables two-stage-least-squares estimation on the Young Lives 2009 cross-sectional dataset from Andhra Pradesh, India, to understand the aforementioned relationship.
RESULTS: The selected measure of household economic standing differentially affects the estimation. There is significant positive effect of both short-run household expenditure and long-run household wealth on child stunting, with the latter having a larger impact. The backward link running from child health to household income is likely an inverse association in our sample with lower child health inducing higher earnings. While higher average community education improved child health, increased community entertainment expenditure is found to have a negative effect.
CONCLUSION: While policies catered towards improving household wealth will decrease child stunting in the long run, maternal education and the community play an equally reinforcing role in improving child health and are perhaps faster routes to achieving the goal of better child health in the short run.