Household Financial Distress and Initial Endowments: Evidence from the 2008 Financial Crisis

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

This paper studies in utero exposure to the 2008 financial crisis. Exploiting the sudden and unexpected collapse of the Icelandic economy, I find that first-trimester exposure to the crisis led to a sizable and significant reduction in birth weight, increased the probability of a low birth weight ( < 2500 g), and decreased the probability of a high birth weight ( > 4000 g). I also find evidence that the collapse reduced the sex ratio, indicating selection in utero due to maternal prenatal stress exposure. My results imply large welfare losses from financial distress that have hitherto been ignored – because children with worse health at birth can expect substantially lower lifetime earnings – and suggest that economic hardships may in general exacerbate income inequalities in the long run as low-income households are typically more exposed to financial distress.
Original languageEnglish
JournalHealth Economics
Volume25
Issue numberSupplement S2
Pages (from-to)43-56
Number of pages14
ISSN1057-9230
DOIs
Publication statusPublished - Nov 2016

Keywords

  • Fnancial distress
  • In utero shocks
  • Health at birth

Cite this

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abstract = "This paper studies in utero exposure to the 2008 financial crisis. Exploiting the sudden and unexpected collapse of the Icelandic economy, I find that first-trimester exposure to the crisis led to a sizable and significant reduction in birth weight, increased the probability of a low birth weight ( < 2500 g), and decreased the probability of a high birth weight ( > 4000 g). I also find evidence that the collapse reduced the sex ratio, indicating selection in utero due to maternal prenatal stress exposure. My results imply large welfare losses from financial distress that have hitherto been ignored – because children with worse health at birth can expect substantially lower lifetime earnings – and suggest that economic hardships may in general exacerbate income inequalities in the long run as low-income households are typically more exposed to financial distress.",
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Household Financial Distress and Initial Endowments : Evidence from the 2008 Financial Crisis. / Olafsson, Arna .

In: Health Economics, Vol. 25, No. Supplement S2, 11.2016, p. 43-56.

Research output: Contribution to journalJournal articleResearchpeer-review

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