The recession begins in the womb

Economic recessions can be as damaging to a baby’s health as smoking or drinking during pregnancy, according to the first study to establish a causal link between foetal exposure to financial stress in an advanced economy and the health of babies at birth.

Research by Arna Vardardottir, assistant professor at the department of economics at Copenhagen Business School, tracks the unexpected collapse of Iceland’s economy in 2008. After studying the weight of newborn children in Iceland’s national birth register, Vardardottir found that babies who had been in their first trimester during the crisis were born 120g lighter than the average. They were also 3.5% more likely to have a low birth weight (less than 2.5kg) than average and were generally more likely to suffer from neonatal diseases.

Vardardottir said her results showed that financial stress had an impact similar to those of the two most widely cited behavioural issues during pregnancy: smoking and drinking. “My results show that a sudden deterioration in economic conditions has a negative impact on birth outcomes and that children in the early stages of gestation are more vulnerable to such shocks,” she said. “The findings suggest large losses from financial distress that have previously been ignored: children with worse health at birth can expect to earn substantially less over their lifetime, and low-income families are more likely to experience financial stress.” She explained, “The results imply large welfare losses from financial distress that have hitherto been ignored because children with worse health at birth can expect substantially lower lifetime earnings,” she said. “They suggest that economic hardships may in general exacerbate income inequalities in the long run, since low-income households are typically more exposed to financial stress.”