Hyuk Harry Son 

Title: Drought Insurance and Human Capital: Exploring Short- and Long-term Impacts on Child Work and Education 

Abstract: Aggregate shocks such as droughts can have substantial negative impacts on human capital outcomes. Formal insurance against such covariate shocks can mitigate these adverse consequences on human capital. This project investigates the effects of drought insurance on children's time use between work and schooling in pastoral households of Kenya and Ethiopia, in the short- and the long-term, using a commercial drought insurance product insuring against livestock loss. For identification, exogenous variations from randomized premium discounts were used to estimate the local average treatment effect of insurance uptake. Insurance increased children's education both in the short- and in the long-run. In the short term, it reduces child labor and part-time work, shifting children’s activities toward full-time schooling, although overall school attendance does not increase significantly. In the long run, insurance ended up increasing children's educational attainment. This seems to result from reduced demand for child labor due to changes in production strategies: In the short-term, insurance also reduces herd size and increases herd mobility. In the long-term, herd composition shifts from small stock like goats towards larger animals such as camels and cattle. The results are robust to a range of prospective confounders, including controlling for prospective spillover effects among households.