Parental Response to Early Human Capital Shocks: Evidence from the Chernobyl Accident

Little is known about the response behavior of parents whose children are exposed to an early-life shock. We interpret the prenatal exposure of the Austrian 1986 cohort to radioactive fallout from the Chernobyl accident as a negative human capital shock. We can rely on exogenous variation in the exposure to radioactive fallout (over time and) between communities due to differences in precipitation at the time of the accident. Our approach provides robust empirical evidence for compensating investment behavior. Families with low socioeconomic status reduce their family size, while families with higher status respond with reduced maternal labor force participation.