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Maria Rosales-Rueda is an Assistant Professor at the University of California, Irvine.
Abstract: Although the early-origins literature in economics and other disciplines suggests that early-life shocks have long-term consequences, it does not investigate whether later human capital investments have the potential to mitigate such consequences. This study examines how early-life conditions interact with subsequent human capital investments to influence future educational outcomes. To provide causal evidence, we exploit two sources of exogenous variation: i) variation in early-life environments re- sulting from a child’s exposure to extreme rainfall and drought shocks in early-life; and ii), variation in subsequent investments resulting from the availability of conditional cash transfers (CCT) that promote investments in children’s health and education. Us- ing Colombian administrative data, we combine a natural experiment with a regression discontinuity design using the CCT assignment rule. Results show that although the CCT has an overall positive impact on children’s educational outcomes that is robust to accounting for exposure to negative shocks early in life, there is limited evidence that the CCT has a differential effect on children exposed to early shocks. However, the main effect of the CCT is large enough to offset the negative impact of the weather shock. These findings have important policy implications as they provide evidence of the role of social policies in closing gaps generated by early-life trauma.