Does Unemployment Worsen Babies' Health? A Tale of Siblings, Maternal Behaviour and Selection

52 Pages Posted: 4 Sep 2019

See all articles by Elisabetta De Cao

Elisabetta De Cao

London School of Economics & Political Science (LSE) - London School of Economics; IZA

Barry McCormick

IZA Institute of Labor Economics

Catia Nicodemo

University of Oxford - Centre for Health Service Economics and Organisation; University of Oxford - Department of Economics

Abstract

We study the effect of unemployment on birth outcomes by exploiting geographical variation in the unemployment rate across local areas in England, and comparing siblings born to the same mother via family fixed effects. Using rich individual data from hospital administrative records between 2003 and 2012, babies' health is found to be strongly pro-cyclical. A one-percentage point increase in the unemployment rate leads to an increase in low birth weight and preterm babies of respectively 1.3 and 1.4%, and a 0.1% decrease in foetal growth. We find heterogenous responses: unemployment has an effect on babies' health which varies from strongly adverse in the most deprived areas, to mildly favourable in the most prosperous areas. We provide evidence of three channels that can explain the overall negative effect of unemployment on new-born health: maternal stress; unhealthy behaviours - namely excessive alcohol consumption and smoking; and delays in the take-up of prenatal services. While the heterogenous effects of unemployment by area of deprivation seem to be explained by maternal behaviour. Most importantly, we also show for the first time that selection into fertility is the main driver for the previously observed, opposite counter-cyclical results, e.g., Dehejia and Lleras-Muney (2004). Our results are robust to internal migration, different geographical aggregation of the unemployment rate, the use of gender-specific unemployment rates, and potential endogeneity of the unemployment rate which we control for by using a shift-share instrumental variable approach.

Keywords: unemployment rate, birth outcomes, birth weight, fertility, England

JEL Classification: E24, I10, I12, J13

Suggested Citation

De Cao, Elisabetta and McCormick, Barry and Nicodemo, Catia, Does Unemployment Worsen Babies' Health? A Tale of Siblings, Maternal Behaviour and Selection. IZA Discussion Paper No. 12568, Available at SSRN: https://ssrn.com/abstract=3445834 or http://dx.doi.org/10.2139/ssrn.3445834

Elisabetta De Cao (Contact Author)

London School of Economics & Political Science (LSE) - London School of Economics ( email )

IZA ( email )

Barry McCormick

IZA Institute of Labor Economics ( email )

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Catia Nicodemo

University of Oxford - Centre for Health Service Economics and Organisation ( email )

Oxford
United Kingdom

University of Oxford - Department of Economics ( email )

10 Manor Rd
Oxford, OX1 3UQ
United Kingdom

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