We Don’t Need No Education: The Effect of Income Shocks on Human Capital in Africa

We explore the effects of early-life income shocks on human capital using oil price fluctuations in a large sample of relevant African countries and employing microdata from multiple waves of the Demographic and Health Surveys. Such shocks enable human capital investment via the standard income effect but also crowd it out because of substitutability between natural resource and human capital income sources. The relative strength of the two effects depends on the age at which the shock is experienced. We find that income shocks in early life are associated with enhanced educational attainment and wealth but are sometimes linked to reduced levels of such outcomes if experienced in adolescence.