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The impact of macroeconomic crises on the investments made by parents in the human capital of their children is a question of considerable policy importance. Analysis of the effects of the profound 1988-92 macroeconomic crisis in Peru on the schooling and employment decisions of school-age children in urban areas finds no effect on attendance rates but a significant decline in the fraction of children who are both employed and attend school. It also finds significantly higher mean educational attainment for children exposed to the crisis than for those who were not. These findings may be related: children who are not employed have more time available and may therefore put more effort into school.

The Peruvian Social Fund (FONCODES) was created by President Alberto Fujimori in 1991 with the stated objectives of generating employment, alleviating poverty, and improving access to social services. This article uses province-level data on monthly expenditures, socioeconomic indicators, and electoral outcomes to analyze political influences on the timing and geographic distribution of FONCODES expenditures between 1991 and 1995. I reach three main conclusions. First, these expenditures increased significantly before national elections. Second, FONCODES projects were directed at provinces in which the marginal political effect of expenditures was likely to be largest. Third, these projects favored the poorest provinces, which suggests that the program also had a redistributive function. The results are robust to a large number of specifications and controls. The Peruvian data support predictions made in the literature on political business cycles as well as the literature on political influences on the allocation of discretionary funds.

The Peruvian Social Fund (FONCODES) was created by President Alberto Fujimori in 1991 with the stated objectives of generating employment, alleviating poverty, and improving access to social services. This article uses province-level data on monthly expenditures, socio-economic indicators, and electoral outcomes to analyze political influences on the timing and geographic distribution of FONCODES expenditures between 1991 and 1995. I reach three main conclusions. First, these expenditures increased significantly before national elections. Second FONCODES projects were directed at provinces in which the marginal political effect of expenditures was likely to be largest. Third these projects favoured the poorest provinces; which suggests that the program also had a redistributive function. The results are robust to a large number of specifications and controls. The Peruvian data support predictions made in the literature on political business cycles as well as the literature on political influences on the allocation of discretionary funds. (American Political Science Review / FUB)