The Impact of Public Expenditure on Child Malnutrition in Peru: Are Exclusion Mechanisms at Work?

Gissele Gajate Garrido, University of California, Los Angeles

Why is the urban-rural gap in child malnutrition increasing in Peru despite government efforts to improve public services' provision? This paper examines the impact of regional public expenditure in Peru on young children's nutritional outcomes. To account for policy endogeneity, I instrument for public expenditures using the level of natural resource royalties assigned to each region. I consider supply and demand restrictions that diminish the effectiveness of public expenditure. I find that, regardless of the type of expenditure analyzed, public spending has a positive impact on children's outcomes only in urban areas. However, worse off urban households do not benefit from public spending. The poor face constraints that limit their ability to make use of public services. In rural areas, there is no effect for either the poor or the non-poor. This result is due to public services lower quantity/quality and the crowding out of private expenditure in rural areas.