Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2016:29: Does Debt Relief Improve Child Health? Evidence from Cross-Country Micro Data

Anna Welander ()
Additional contact information
Anna Welander: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: This paper analyzes the effects of a multilateral debt relief program on child health. The International Monetary Fund and the World Bank launched the Heavily Indebted Poor Countries Initiative in the late 1990s to reduce the debt burdens of poor countries, and explicitly linked the initiative to the aim of poverty reduction and social targets. As a result, debt-servicing costs have gone down by an average 1.8 percentage points of gross domestic product in Heavily Indebted Poor Countries. However, the social effects of debt relief are not well known. The paper employs micro data on infant mortality from 56 country-specific Demographic and Health Surveys to investigate the effects of the Heavily Indebted Poor Countries Initiative on child health. The retrospective fertility structure of the data allows for analysis using the within-mother variation in the probability of survival of babies before and after different stages of the initiative. The results suggest that after a debt-ridden country enters the program, which is conditional on reform and pro-development policies, and receives interim debt relief, the probability of infant mortality goes down by about 0.5 percentage point. This translates into about 3,000 fewer infant deaths in an average Heavily Indebted Poor Country. The findings are particularly strong for infants born to poor mothers and mothers living in rural areas, and are driven by access to vaccines early in life and during pregnancy. There are no child health effects from graduating from the program and receiving full debt relief.

Keywords: Debt Relief; Heavily Indebted Poor Countries Initiative; Child Health; Demographic and Health Surveys

JEL-codes: F34; I15; I18

41 pages, October 25, 2016

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