Young lives and wealthy minds: The nexus between household consumption capacity and childhood cognitive ability

Childhood cognitive outcomes are an important indicator of future human capital potential and a predictor of economic development in low-and middle-income countries. Recent studies have examined the role household resources have to play in fostering human capital potential from an early age. This paper contributes to the literature by examining the relationship between household consumption capacity and cognitive ability for children in Ethiopia, Peru, and Vietnam using longitudinal data from the Young Lives study. A modest relationship between household consumption capacity and cognitive ability is established using hierarchical fixed effects models. This result is robust to alternative measures of cognitive ability and wealth. Further, the study considered non-linear specifications to determine whether the association between consumption capacity and cognitive ability diminishes at relatively higher wealth levels. Contrary to theoretical predictions, results from the model suggest that the relationship between consumption capacity and cognitive ability is predominantly linear.