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This dissertation concerns various types of economic shocks and the implications of such shocks on the decisions of households. There has been a long history in the theoretical economics literature of modeling agents as forward-looking and thus in making their life-cycle decisions they will have accounted for the paths they expect their income, wealth, or economic opportunities to take. Therefore, these chapters will focus on households' responses to unexpected changes in economic factors. The two types of economic shocks to be explored are income shocks, a shock that will affect only one spouse, and house price shocks, a shock that affects both spouses. Particular care is given to trying to identify exogenous and unexpected changes in income or wealth for the households. The asymmetric responses to financial gains versus losses are explored for each type of shock.Throughout the analyses are conducted using longitudinal data on individuals or households. These data allow for observations of the sample household through a long portion of its life cycle and through changes in their economic situation. In the first chapter, I explore the effects of unpredicted changes in permanent income of each spouse on the probability of divorce for the couple. I find that if the husband experiences a negative income shock, the probability of divorce increases. If the wife experiences a negative income shock, this effect on divorce is only true if she had a switch into unemployment. In Chapter 2, I continue the analysis of economic shocks on probability of divorce by looking at responses to local house price shocks. These local housing prices give us changes in wealth for the households that are exogenous to many of the other decisions an individual household makes. In response to a positive house price shock, the risk of divorce decreases for couples. Finally in the third chapter, I analyze the effect of housing prices on another household behavior: labor supply choices. Married female homeowners are less likely to be employed following a positive house price shock in their metropolitan area. Conversely, older married male homeowners are more likely to be employed when there are negative house price shocks in their area.

This dissertation examines how exogenous changes in income affect the most vulnerable populations in Ecuador: poor children and their mothers. It explores the effects of a negative income shock that is due to the 1998-2000 economic crisis and a positive income shock that is due to the introduction of a cash transfer program, the Bono de Desarrollo Humano. The outcomes examined are those related to early childhood development and to spousal domestic violence. Both improvements in child development and reductions in domestic violence are crucial for breaking the inter-generational transmission of poverty and for achieving the Millennium Development goals.The first chapter of this dissertation investigates the effects of Ecuador's 1998-2000 economic crisis on child health and cognitive development. This crisis was characterized by a drastic increase in prices and the eventual adoption of the dollar as its currency. While many reports show that household consumption decreased and poverty increased, there are no studies on the impact of the crisis on child development. I use data from three and five years after the crisis to investigate whether the Ecuadorian crisis had a negative and persistent impact on children's height and language development. In order to estimate the effect of the crisis on child outcomes I take advantage of the variation in children's exposure to the crisis that is due to birth month and province. Results suggest that one year of exposure to the crisis significantly decreased height-for-age z-scores by .1 SD and vocabulary test scores by 2.4 points. The effect of the crisis, however, was not uniform across households. Particularly, in rural areas children from farming households and those with more access to early childhood nutrition programs were significantly more protected from the crisis. Potential pathways through which the crisis impacted child outcomes are also explored.The second chapter, which is co-authored with Lia Fernald, takes advantage of the randomized roll-out of Ecuador's Bono de Desarrollo Humano (BDH) to examine the effects of an exogenous increase in income on the health and development outcomes of very young children. Families enrolled in the BDH received a monthly cash stipend ($15 USD) representing an approximate 6-10% increase in household income. Participants analyzed in this study are children 12-35 months old from treatment and comparison communities in rural and urban Ecuador. Main outcomes measured are language skills (the Fundación MacArthur Inventorio del Desarollo de Habilidades Comunicativas - Breve), height-for-age z-score, and hemoglobin concentration. Results indicate that in rural areas, being randomized to receive the BDH in very early childhood led to significantly better performance on the number of words a child was saying, and on the probability that the child was combining two or more words. There were no significant effects on language development for children in urban areas and there were no effects on height-for-age z-score or hemoglobin concentration in rural or urban areas. A limited number of potential pathways with respect to cognitive/language stimulation, health behaviors, and parenting quality are also explored. Findings indicate that compared to children in comparison areas, rural children in treatment areas were more likely to have received vitamin A or iron supplementation and have been bought a toy in the past six months. The third chapter, which is co-authored with Lia Fernald, also takes advantage of the randomized roll-out of the Bono de Desarrollo Humano to investigate how an exogenous increase in a mother's income impacts spousal domestic violence. We use existing household bargaining models to predict when a cash transfer will lead to an increase in domestic violence and when it will lead to a decrease. Consistent with predictions, results reveal that for more educated women who had more credible outside-of-marriage options, the BDH decreased psychological violence. However, for less educated women who did not have credible outside options, the effect of the cash transfer was ambiguous and depended on whether the husband or partner had more education than his wife or partner. In particular, for less educated women the cash transfer decreased psychological violence in households where the husband or partner had more education than his wife or partner, and it increased psychological violence in households where the opposite was true. Although the BDH led to significant changes in psychological violence, it did not lead to corresponding changes in physical violence.