Published on Development Impact

Multi-dimensional consequences of economic shocks: Learning from other disciplines

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This blog has previously explored the (somewhat rare) involvement of other social science disciplines in development economics research. Now a new book helps move the ball down the field a bit more. Entitled Children and Youth in Crisis, and edited by Mattias Lundberg and Alice Wuermli, the book combines various disciplinary perspectives on the impacts of economic shocks on human development. (Here is the link to the pdf of the book, and here is the link to the widget.) It’s a vigorous attempt to integrate the diverse approaches of economics, sociology, and developmental psychology into a comprehensive framework to analyze consequences of shocks that take place during critical formative years in a young person’s life.

At the World Bank we are typically accustomed to the division of development practice into sectoral silos such as heath or education. But strict divisions do not necessarily do justice to the interconnected processes of human development.  For the individual, the physical, cognitive, and social-emotional domains are highly integrated and it’s likely that impairment in one domain will affect others. Furthermore, human development exhibits “dynamic complementarities” – previously acquired skills or capabilities enable the development of further skills. Thus developmental detriments due to shocks may derail the effectiveness of all future investments.

 In other words, a short lived crisis can have long run consequences in a variety of dimensions. This is why it’s important to maintain a comprehensive understanding of the pathways of human development and the cascading consequences when a pathway is interrupted or otherwise disturbed.

But negative consequences from shocks are not a certainty; not every child will suffer permanent impairment from adverse conditions. Some children appear to develop “normally” despite a severe negative shock to the household. Currently much research in developmental psychology is focused on determining the correlates and predictors of good adaptation among young people at risk as well as understanding the causes and mechanisms behind these correlations. This “resilience” research seeks to understand why some children (and families) exhibit positive adaptation during and after shocks while others do not.

Resilience is not a rare trait but rather, as written in the book, “deeply rooted in fundamental biological, interpersonal, and socio-cultural systems of human adaptation that have evolved in the face of risk, adversity, or threat.” Resilience factors previously identified in U.S. populations include positive attachment bonds with caregivers (primarily family), positive relationships with other nurturing and competent adults (such as teachers), self-regulation skills (principally self-control), and positive self-perceptions (self-efficacy). Are these same resilience factors present in other global contexts? If so, would they be expressed in the same manner, i.e. would be able to measure them? These are just some of the questions confronting human development researchers working in developing countries.

There are two other important take-away messages for the applied researcher:

The importance of context in identifying beneficial or protective behaviors. Perhaps the best example that highlights the importance of context concerns the question of optimum parenting style to promote academic and socio-emotional capabilities in children. The earliest studies in this area suggested that authoritative parenting (which combines warmth with firm control) promotes greater competence than authoritarian (low warmth, high control) or laissez-faire (low warmth, low control) parenting. However subsequent work in other settings identified a different optimum parenting style. Among households in impoverished U.S. inner city neighborhoods it turns out that authoritarian parenting styles were associated with less adolescent delinquency and thus “high control” parenting may have adaptive value in more dangerous neighborhoods.

The importance of stress as a negative transmission mechanism. Family stress studies in rich countries suggest that it is not poverty or economic hardship in itself but rather deteriorating intra-family relations brought on by economic hardship that cause “negative” child development. Economic crisis can increase a mother’s stress and depression which reduces her sensitivity and response to a young child’s cues. This in turn may reduce the probability that the infant develops a secure attachment relationship and the lack of a secure attachment relationship has been linked to various negative outcomes later in life such as lower socio-emotional development (lower self-esteem, higher anxiety etc.), less educational achievement, and diminished labor market outcomes.

Economic studies that look at the under-five mortality impacts or nutritional consequences of economic shocks are well known. These outcomes are familiar to economists and we presume that the major transmission channel leading to these outcomes is a fall in real income. While undoubtedly true (at least at times) the modes of transmission through which shocks can affect welfare, as well as the outcomes affected, are far broader. The multidisciplinary approach in Youth and Children in Crisis well serves this more comprehensive approach. It also highlights the protective role of personal characteristics such as self-control, and suggests compensatory investments in human capital such as mentoring or improvements in school and teacher quality. Developing country research that integrates human developmental science and economics has barely begun but hopefully one day it will lead to smarter tailored protective policies.


Jed Friedman

Lead Economist, Development Research Group, World Bank

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