You Are What Your Parents Think: Height and Local Reference Points

Recent estimates are that about 170 million children under five years of age are stunted, with significant long-run negative consequences on their schooling, cognitive skills, health and economic productivity. Understanding what determines such growth retardation,therefore, is very important. We build a structural model for nutritional choices and height growth with reference–dependent preferences. Parents care about the relative height of their child compared to some reference population. In our empirical model, reference height is an equilibrium object determined by the parental nutritional choices for earlier cohorts in the same village. Taking advantage of a protein-supplementation experiment in Guatemala, we use exogenous variations in differential height growth paths between treated and control villages to estimate the model. We conduct a number of counterfactual policy simulations. First, we find that reference point changes account for up to 60% of the 1.7 cm in height difference between experimental and control villages at 24 months of age. Second,focusing on one-period effects, to obtain the same mean effects as an 1 cm increase in reference points would require a protein-price discount of 37 percent or an income increase of 60 percent. Third, endogenous reference points changes lead to significant policy spillovers: under poor-targeted subsidy policies, richer households over time gain up to 50 percent of the height gains of poorer households; under an universal subsidy policy, poorer households’ height gains increase from an initially low level by up to 4.8 times across periods as richer households,who also receive subsidies, help push up height reference points.

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