Cognitive ability and transitory productivity shocks

Abstract: People who live in rural areas in low-income countries not only live in poverty, they also have to deal with an extremely variable income. In the absence of a well-functioning credit market, these fluctuations can be costly for households. This study aims to provide knowledge to the cost of these fluctuations, more precisely the study aims to answer how transitory weather shocks in Kenya affect children´s cognitive ability. Where weather shocks are assumed to be aggregated shocks that temporarily change the productivity in districts. The result from the study shows that drought, which can be seen as a negative shock, decrease the cognitive ability of children 11 to 16. The effect is marginally significant at the 10 percent level. No significant effect on cognitive ability is found for children aged 6 to 10. The result for older children is robust to alternative specifications. The study does not show any conclusive evidence on different effects on how boys and girls are affected by droughts.