Abstract
We develop an overlapping generations model to examine how illness affects a household’s long-term economic condition through its immediate implication on the household’s decision to invest in their child’s education. A prolonged period of illness or premature death of an earning member reduce household income, which in turn adversely affects a household’s ability to invest in child education. Low investment in child education contributes to low household income in the future. Thus illness can generate a low-income low-education trap. We show how a policy of providing alternate education in skilled care-giving to those who were forced to forgo their formal education to take care of ill family members, could help economically devastated families to escape the trap.