When the Wind Blows: Agricultural Fire Exposure, Parental Investment, and Long-term Outcomes

This paper examines the medium and long-term human capital consequences of in-utero exposure to agricultural fires in rural China. Leveraging data from a nationally representative household sample, we exploit exogenous variations in birth month, fire intensity, and wind direction to identify the causal effect of fetal exposure to fire. We show that in-utero exposure to agricultural fires significantly reduces individuals’ health, cognitive, and non-cognitive performance in adolescence. Tracking these cohorts into their adulthood, we find that fire exposure decreases education years and earnings. Besides the transmission of adverse conditions in early life, a key mechanism driving the persistent effect of fetal exposure is that liquidity-constrained households reinforce the negative impacts by reallocating resources (e.g., health and education investment) away from exposed children. Using the phased rollout of China’s New Cooperative Medical Scheme (NCMS) as a quasi-experiment, we find that health insurance coverage can largely offset the deleterious effects of agricultural fire exposure by easing financial constraints and promoting parental investments. Our findings underscore the disproportionate cost of pollution on vulnerable rural families and have significant policy implications for how to mitigate the adverse effects of pollution exposure.