This paper studies the effect of improved early-life health care, through assignment to a special care nursery (SCN), on early-childhood development assessments at age five. We use linked administrative data in the Northern Territory of Australia and exploit the fact that assignment to SCN is largely based on rules of thumb involving low birthweight thresholds. We find large positive effects of SCN assignment
on physical development, social competence, and emotional maturity at age five for indigenous children. We do not find similar benefits among non-indigenous children. Our results suggest that costly early-life health interventions, that are shown to increase survival probabilities of children in the short run, can also substantially boost development in early childhood for children from severely disadvantaged socioeconomic backgrounds.