Maternal nutrition is an important input into the early-life health and development of children in developing countries. However, we identify three reasons that parents may underinvest in maternal nutrition. First, early-life health has fiscal externalities: healthier babies become more productive adults, who pay higher taxes; second, parents may not recognize the importance of maternal nutrition; and finally, low women's status may prevent adequate feeding of young mothers. We present a simple model of maternal nutrition investments, and solve for an optimal subsidy; however, in a developing country with an inefficient fiscal system, such a subsidy could be prohibitively costly. We therefore calibrate our model to data from the IHDS-II, to evaluate a richer set of policy instruments in a setting with high maternal malnutrition. We find that a non-linear policy combining a modest subsidy with a large award for reaching a basic level of investment could generate significant welfare gains.
Presented in Session 5. Health & Mortality 1