In contrast to other studies, this paper examines the determinants of short-term child health by controlling for the long-term health status of children. Using data from rural Ethiopia and linear mixed models that control for individual heterogeneity, the empirical analysis indicate that the effect of per capita household expenditures on the weight-for-age z-scores of children in rural Ethiopia is influenced by the children’s height-for-age z-scores implying that the efficiency with which short-term health inputs are transformed into health outcomes is significantly affected by long-term health status of children.