Economic resilience and childhood growth: the construction of a household economic resilience index in Indonesia

Abstract

In the face of rising economic uncertainty, household economic resilience is a pivotal concern, particularly in developing countries. Concurrently, child stunting and cognitive impairment stand as critical developmental challenges, significantly impacting the prospects of low socioeconomic status households. This study seeks to establish a comprehensive and valid measure of household economic resilience, employing multidimensional household characteristics for index construction. Leveraging data from the 2014 Indonesian Family Life Survey (IFLS), the study forms a latent variable for household economic resilience through factor analysis. This variable encompasses indicators of economic welfare, living conditions, social protection, and financial literacy, each of which is itself a latent variable assembled from multiple constituent variables. Furthermore, we investigated the influence of household resilience on child growth, utilizing rainfall as an instrumental variable (IV). The results indicate a noteworthy decrease in stunting likelihood with an increase in the resilience index. Nevertheless, although positive, the effects on HAZ, WAZ, and WHZ did not yield statistical significance. Notably, an elevation in children’s total cognitive z-score and math cognitive z-score was observed, while encounters with economic shocks in the past five years did not yield significant results. The resilience index stands poised to aid policymakers in targeting vulnerable groups, and channeling resources, and social protection programs to those most in need.