In America, we study the innovation of antibiotics in 1937, which led to sharp improvements in infant health that were pervasive- among blacks and whites, in the South and the North. This was mirrored in long run economic gains. However, for blacks and only for blacks, there is a gradient in birth-state level racial discrimination: blacks in the deep South experience no long run economic gains. As a result, the antibiotic revolution increased population-averaged incomes, but widened racial earnings inequality.

In an extension of this work, we investigate the scope for remediation later in life. We leverage independent variation in a minimum wage law introduced in 1966 under the Fair Labour Standards Act- at a time when the marginal antibiotic-exposed cohorts were young adults. Using state and industry variation in the bite of this law, we show that it undid the widening of the racial earnings gap that emerged from the antibiotic revolution.

In Sweden, we study a postnatal health intervention implemented in 1931, which pioneered today’s universal mother-baby programmes and was one of the first pillars of an emergent welfare state. We show that eligible cohorts experienced improvements in life expectancy, test scores and earnings. However, the increase in earnings was entirely driven by women.

After ruling out competing explanations, we show that this is because job opportunities for women were growing more rapidly than for men when the treated cohorts emerged onto the labour market. This was because the welfare state was growing in leaps and bounds, generating jobs for teachers, nurses and midwives, who were predominantly women.

To summarize, in both studies we uncover a causal chain running from a policy shock that improves early life health to skill acquisition. For the population as a whole, there is a corresponding increase in earnings. However, the increase in earnings is driven by a component of the population that, at the time, has access to job opportunities- white men in America, and women in Sweden. In the America setting, we are able to demonstrate earnings gains for black men after their labour market position is improved through legislation.

References:

1. Infant health, cognitive performance and earnings: Evidence from inception of the welfare state in Sweden. With M Karlsson, T Nilsson, N Schwarz. Review of Economics and Statistics. Forthcoming.

2. Infant health and longevity: Evidence from a historical intervention in Sweden. With M Karlsson and T Nilsson. Journal of the European Economic Association, October 2017.
3. Bhalotra, A. Venkataramani, S Walther. 2022. Women’s labor market and fertility responses to a health innovation. Forthcoming, Journal of the European Economic Association
4. Bhalotra, D. Clarke, A. Venkataramani. 2022. Shadows of the Captain of the Men of Death: the antibiotic revolution and earnings. R&R, Journal of Political Economy. First version 2012, substantial revision 2022
5. Bhalotra, D. Clarke, A. Venkataramani. 2022. The black-white earnings gap- Endowment shocks and opportunities. Mimeograph.