On the Children of Inflation Stabilization: Wealth Effects, Fertility Decisions and Child Health

Marcos A. Rangel, Princeton University and NORC at the University of Chicago

High and persistent inflation has been one of the distinguishing macroeconomic characteristics of many Latin American countries since the end of World War II. Several attempts to curb the inflationary problem have been undertaken by policy makers in the region. More often than not, these stabilization plans have had quick yet short-lived success. Despite the prominence of inflation of the economic issue in these countries, very little is known about its effects (or the effects of stabilization attempts) over microeconomic decisions with large long-term consequences like fertility and investment in children’s health. The present article finds evidence of increased number of births after stabilization, in particular for women most likely to be exposed to inflation taxing over their money balances (poor and unbanked). Focusing on the short-time window around drops in inflation rates (when adjustment in fertility would not be possible), a small but significant increase in birth-weight is uncovered.