Research Seminar in Economics - Libertad Gonzalez Luna, "The Effect on an Income Shock at Birth on Child Health: Evidence from a Child Benefit in Spain"

Family income has been shown to be strongly associated with child health and development. However, the extent to which this relationship is causal has been hard to establish. I take advantage of the unexpected introduction of a generous child benefit in Spain in 2007 to analyze the effect of a (transitory) shock to household income right after birth on child health outcomes. I follow a regression discontinuity approach, comparing children born in a close neighborhood of the threshold date for benefit eligibility (which was unknown in advance), from birth to age 5. I use administrative data from birth and death certificates, as well as hospital records. My contribution relies on a credible and clean identification strategy, combined with high-quality administrative data, for a type of subsidy that is common in many countries (a “maternity allowance”). I find no significant effect of the subsidy on neonatal, infant or child mortality. However, children whose mothers were eligible for the transfer had significantly higher hospitalization rates in the months and years following benefit receipt. I study potential channels that can explain this result, and conclude that the child benefit increased health care utilization. Eligible mothers took longer to go back to work after birth and children started daycare later, which may have improved detection and treatment of child health problems.