The Influence of Early-Life Events on Human Capital, Health Status, and Labor Market Outcomes Over the Life Course

Abstract

Abstract Using national data from the U.S., we find that poor health at birth and limited parental resources (including low income, lack of health insurance, and unwanted pregnancy) interfere with cognitive development and health capital in childhood, reduce educational attainment, and lead to worse labor market and health outcomes in adulthood. These effects are substantial and robust to the inclusion of sibling fixed effects and an extensive set of controls. The results reveal that low birth weight ages people in their 30s and 40s by 12 years, increases the probability of dropping out of high school by one-third, lowers labor force participation by 5 percentage points, and reduces labor market earnings by roughly 15 percent. While poor birth outcomes reduce human capital accumulation, they explain only 10 percent of the total effect of low birth weight on labor market earnings. Taken together, the evidence is consistent with a negative reinforcing intergenerational transmission of disadvantage within the family; parental economic status influences birth outcomes, birth outcomes have long reaching effects on health and economic status in adulthood, which in turn leads to poor birth outcomes for one’s own children.