  Recent estimates are that about 150 million children under five years of age
are stunted, with substantial negative consequences for their schooling,
cognitive skills, health, and economic productivity. Therefore, understanding
what determines such growth retardation is significant for designing public
policies that aim to address this issue. We build a model for nutritional
choices and health with reference-dependent preferences. Parents care about the
health of their children relative to some reference population. In our
empirical model, we use height as the health outcome that parents target.
Reference height is an equilibrium object determined by earlier cohorts'
parents' nutritional choices in the same village. We explore the exogenous
variation in reference height produced by a protein-supplementation experiment
in Guatemala to estimate our model's parameters. We use our model to decompose
the impact of the protein intervention on height into price and reference-point
effects. We find that the changes in reference points account for 65% of the
height difference between two-year-old children in experimental and control
villages in the sixth annual cohort born after the initiation of the
intervention.
