Essays On Consequences And Responses To Economic Shocks

This dissertation consists of three chapters that study the consequences of income or price shocks on important economic dimensions of villages, households, and individuals, and how they respond to these shocks. The first chapter investigates whether local governments respond to local economic shocks. I use heterogeneity in the effects of rice import restriction on rice price shocks across Indonesian villages to investigate public resources provision responses to local price shock. To this end, I combine village agro-climatic conditions for growing rice with provincial rice price over time to construct plausibly exogenous price shocks at the village level. Using a comprehensive longitudinal dataset of 53,000 villages, I find that an increase in rice price is associated with negative income growth in villages less suited for growing rice, and local governments responded to it by increasing public resources -- public health facilities and financial capital assistance -- towards those villages. The effects on public health facilities (financial assistance) are only significant in high (low)-inequality villages. Increased social capital only in low-equality villages can provide a plausible explanation for the heterogeneous result on financial assistance projects. I also show that an increase in public health facilities was associated with a reduction in infant mortality suggesting evidence of good targeting by local governments. The second chapter (co-authored with Patrick Asuming and Hyuncheol Bryant Kim) investigates the long-run effects of a health insurance subsidy in Ghana, where mandates are not enforceable. We randomly provide different levels of subsidy (1/3, 2/3, and full), with follow-up surveys seven months and three years after the intervention. We find that a one-time subsidy promotes insurance enrollment for all treatment groups, but long-run health care service utilization increases only for the partial subsidy groups. Selection explains this pattern: those who were enrolled due to the subsidy, especially the partial subsidy, are more ill and have greater health care utilization. A careful enforcement of mandatory enrollment is necessary to prevent selection. The third chapter (co-authored with Asep Suryahadi and Daniel Suryadarma) measures the effect of child market work on the long-term growth of human capital, focusing on the output of the human capital production: mathematics skills, cognitive skills, pulmonary function, and educational attainment. Our full sample is drawn from a rich longitudinal dataset Indonesia Family Life Survey (IFLS). We address endogeneity of child market work using provincial legislated minimum wage as the instrument. Our instrumental variable estimation shows that child labor negatively affects mathematics skills and pulmonary function, but not cognitive skills and educational attainment. We find heterogeneities in type of work. Those who work outside of family business have lower educational attainment than those working for family business.