Parents tend to share family resources equally among their children – for example, by allocating more money towards sick children''s health problems but less towards their education compared with healthy siblings.

That is the one of the findings of research by Junjian Yi, James Heckman, Junsen Zhang and Gabriella Conti, published in the November 2015 issue of the Economic Journal. Their study analyses data from a survey of twins in China – in particular how parents allocate health and educational spending after one of the children has fallen seriously ill at some point up to the age of 3.

Parents in the survey spend substantial sums on their children''s education: 910 yuan per year per child on average, which is roughly one third of family income. They also spend 226 yuan per year per child for health. The researchers find that parents spend 305 yuan more on medical expenditures but 182 yuan – one fifth – less on educational expenditures for a sick twin compared with a healthy twin.

They also find that relative to parents in rural areas, parents in urban areas spend twice as much on the health and education of their twin children. The same gap is present between children of more and less educated mothers, and between rich and poor families. But parents do not spend different amounts on sons and daughters.

Although the extra health spending on the sick child is the same amount across these different groups, the extra educational expenditures allocated to the relatively healthy child are greater in urban, more educated and richer families, reflecting their greater availability of resources overall.

The allocation of family resources is an important public health matter. Early life conditions such as diarrhoea can be particularly damaging for children in less developed countries. In the absence of public health insurance and the presence of pervasive poverty, a sick child might not receive prompt medical treatment.

In such circumstances, even preventable conditions that could be easily treated with access to cheap medicines could lead to severe long-term impairments. As the researchers point out, damage could arise through both a purely biological channel and through changes in parental allocation of resources in the family.

Hence the key question that their study explores is whether parents try to compensate for the disadvantage suffered by the sick child, or act to reinforce it by devoting more resources to the healthier child.

Previous research had not reached a consensus on this issue, with some studies finding evidence of compensating behaviour and others of reinforcing behaviour. But these studies had overlooked the possibility that parents can actually both compensate and reinforce along different dimensions of child wellbeing.

The authors use unique data from the Chinese Child Twins Survey, which contains detailed information on the money that parents spend on the health and education of each twin. The researchers study parental expenditures in families in which only one of the twins has been hit by a serious health condition between ages 0-3.

They find that in households where one of the children is hit by a health shock, the father is less likely to buy goods for himself and the mother is more likely to work. They also find that the money that parents spend is effective in improving the wellbeing of their children. Remediation is possible: increased parental medical expenditures on the sick child can partially offset the negative health consequences of a serious health condition early in life.

Nonetheless, even accounting for parental responses, a health shock in early life has long-lasting biological effects under all dimensions of children''s human capital: the affected twin is thinner, in worse health and has poorer academic achievement and more behavioural problems. Because the recent research literature does not routinely account for the role of the family in response to early shocks, the impacts of early life conditions might be over- or underestimated.

The results of this new study have important implications. First, the role of the family must be considered when designing policies of remediation for early disadvantage. Parents can engage in behaviour that can partially offset the impact of public interventions.

Second, a multidimensional view of child wellbeing is needed. Parents can reinforce or compensate for differences in their children''s endowments along different dimensions. This study shows that when considering expenditures both in health and education, the family acts as a net equaliser of resources between children.


''Early Health Shocks, Intrahousehold Resource Allocation and Child Outcomes'' by Junjian Yi, James Heckman, Junsen Zhang and Gabriella Conti is published in the November 2015 issue of the Economic Journal. Junjian Yi is at the National University of Singapore. James Heckman is at the University of Chicago. Junsen Zhang is at the Chinese University of Hong Kong. Gabriella Conti is at University College London