Shocks, Borrowing Constraints and Schooling in rural Vietnam

The impact of crop and health shocks on child education in rural Vietnam is investigated in this paper using a longitudinal database of Vietnamese children. The author explicitly takes into account borrowing constraints and investigates the different effects of shocks on constrained and non-constrained households. His empirical analysis provides further evidence on the role of borrowing constraints in transmitting the effect of shocks. While non-constrained households are able to smooth away the adverse effect of shocks without any consequences for child education, the effect of shocks falls disproportionately on children from borrowing-constrained households, which have limited ability to cope with temporary income losses. The paper finds that shocks can affect both the quantity and quality of education, especially for children from poor and constrained households. Shock-affected households not only withdraw children from school, but they also sharply reduce their spending on child education and decrease children’s study time out of school. The reductions in educational expenditure and study time may affect children’s performance at school and are likely to cause grade repetition and leaving school early.