Essays on Social Interactions and the Long-term Effects of Early-Life Conditions

Sammanfattning: This thesis consists of four self-contained essays.Essay 1: From the late 1970s through mid 1990s blood-lead levels decreased drastically in Swedish children due to the sharp phase-out of leaded gasoline. Exploiting the distinct geographical variation in early childhood lead exposure induced by the  regulations together with micro data on all children in nine birth cohorts I show that reduced lead exposure early in life improves scholastic performance, cognitive ability, and labor market outcomes among young adults. At the relatively low levels of exposure considered, the analysis reveals a nonlinear relationship between local air lead levels in early childhood and adult outcomes, indicating the existence of a threshold below which further reductions no longer improve adult outcomes. Importantly, the effect is greater for children of lower socioeconomic status (SES), suggesting that pollution is one mechanism through which SES affects long-term economic outcomes and that environmental policies could potentially reduce the intergenerational correlation in economic outcomes.Essay 2: During a policy experiment in two Swedish regions in 1967 alcohol availability increased sharply, particularly for people under age 21. The policy experiment was abruptly ended after only 8.5 months due to a sharp increase in alcohol consumption. I exploit the distinct temporal, spatial and age-specific changes in alcohol availability induced by the policy shift to estimate the long-term effects on those in utero during it. I find that children in utero during the short period of increased alcohol availability have significantly lower educational attainments, earnings and increased welfare dependency rates at age 30 in comparison with the surrounding cohorts. Any direct effects of the increased availability on birth-cohort composition (e.g. through an increase in unplanned pregnancies) are not driving the results as the richness of the data allows for a focus on exposed children conceived before the policy experiment started. The results provide compelling evidence that investments in early-life health can yield large effects on outcomes later on in life.Essay 3: We utilize a large-scale randomized social experiment to identify how co-workers affect each other’s effort as measured by work absence. The experiment altered the work absence incentives for half of all employees living in Göteborg, Sweden. Using administrative data we are able to recover the treatment status of all workers in more than 3,000 workplaces. We first document that employees in workplaces with a high proportion treated co-workers increase their own absence level significantly. We then examine the heterogeneity of the treatment effect in order to explore what mechanisms are underlying the peer effect. While a strong effect of having a high proportion of treated co-workers is found for the non-treated workers, no significant effects are found for the treated workers. These results suggest that pure altruistic social preferences can be ruled out as the main motivator for the behaviour of a non-negligible proportion of the employees in our sample.Essay 4: We examine the influence that co-workers’ childbearing has on each other’s fertility decisions. Using linked-employer employee panel data for Sweden we show that female individual fertility increases with on average 10% if a co-worker had a child within the previous 13-24 months. The timing of births among co-workers of the same sex, educational level and co-workers who are close in age is even more influential. Consistent with models of social learning we find that the peer effect for first time mothers is similar irrespective of the birth order of the co-worker’s child, while for higher order births within-parity peer effects are strong but cross-parity peer effects are entirely absent. A causal interpretation of our estimates is strengthened by several falsification test showing that neither unobserved common shocks at the workplace level, nor sorting of workers between workplaces are likely to explain the observed peer effect. We also provide evidence suggesting that peers not only affect timing of births but potentially also completed fertility, and that fertility peer influences spills-over across multiple networks. Our results suggest that social interactions could be an important factor behind the strong inter-temporal fluctuations in total fertility rates observed in many countries.