Heterogeneous consumption and labor market adjustments to birth events in Ghana

• Development Workshop

Date and Location

Monday, November 9, 2015, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

Using a unique data set collected from households with pregnant women in peri-urban Ghana, I examine the consumption and labor supply behavior of households around a birth event. I empirically show that households are able to smooth their consumption in anticipation of fluctuations in their labor incomes irrespective of their asset levels. Poor households are able to smooth their consumption even though their labor income is almost always lower than their consumption during pregnancy and the period after birth. In the case of nonpoor households, their labor income follows a U-shaped path during this period. The decrease in labor income among poor households is moderate compared to nonpoor ones. This suggests that poor households are able to successfully smooth their consumption by preventing their labor income from falling to very low levels during pregnancy. This behavior can have welfare implications for households with low asset levels. In an attempt to prevent their labor income from falling to a level they consider too low, household may end up drawing down their human capital.