This paper empirically investigates the relationship between early childhood health conditions and subsequent educational achievements in a large sample of Indonesian children. I use a long-term panel data set and apply a maternal fixed effect plus an instrumental variables estimator in order to control for possible correlation between some of the components of the error term and the main independent variable, which is likely to cause a bias in the estimates. Differences in health status between siblings are identified by using exposure in early years of life to drought, wildfires, and associated smoke/haze, which seriously affected some parts of Indonesia in late 1997. The estimation results show that health capital (measured by height-for-age z-scores during childhood) significantly and positively affects the number of completed grades of schooling and the readiness to enter school. Nevertheless, I do not find significant evidence of an effect on cognitive test scores.
