If governments tax consumption or labor income, individuals may generate a positive fiscal externality by investing in human capital. We derive sufficient statistics for evaluating the welfare impact of subsidies for health human capital in the presence of these fiscal externalities. Applying this framework to the case of deworming in Kenya, we find that fully subsidizing child deworming raised adult earnings, and hence the NPV of tax revenues, sufficiently to create an “expenditure Laffer effect” which would allow for a Pareto-improving revenue-neutral reduction in tax rates. Consistent with Pitt, Rosenzweig, and Hassan (2012), we estimate differing labor market impacts of child health human capital investments by gender. Ten years after the start of the deworming program, men who were eligible to participate as boys work 3.5 more hours each week, spend more time in entrepreneurship, are more likely to hold manufacturing jobs with higher wage earnings, and have higher living standards. Women, who were eligible as girls, have better educational outcomes, are more likely to grow cash crops, and reallocate labor time from agriculture to entrepreneurship.
Ted recently presented at the February 2014 TEDxBerkeley event at Zellerbach Hall. He discussed results from his paper Quantifying the Influence of Climate on Human Conflict, which he co-authored with Solomon Hsiang and Marshall Burke and appeared last year in Science. See the video here.