Presentation on theme: "Income and Child Development Lawrence Berger, University of Wisconsin Christina Paxson, Princeton University Jane Waldfogel, Columbia Univerity."— Presentation transcript:
Income and Child Development Lawrence Berger, University of Wisconsin Christina Paxson, Princeton University Jane Waldfogel, Columbia Univerity
Motivation Poorer children are at greater risk for worse cognitive and behavioral outcomes. If the association between economic status and child outcomes is causal, it has implications for intergenerational transmission of poverty. Policies and programs that improve outcomes for poorer children may break (or, dampen) the links between poverty across generations.
Previous literature Strong associations between family incomes and children’s outcomes. Issues: Measurement error and unobserved heterogeneity. What are the routes through which money matters? Is the association between income and children’s outcomes larger for poorer children?
This paper Examine the routes through which income and outcomes are associated. Use data from the Fragile Families and Child Wellbeing Study. Examine children’s cognitive and behavioral outcomes at age 3.
Specific questions How is income related to a variety of measures of the home environment and to children’s outcomes? How are child outcomes and home environment measures related? Can income transfer programs be expected to have large effects on children’s outcomes?
Sample Children from 20 US cities, with an oversample of nonmarital births. The sample is about 50% black, 25% Hispanic and 25% white. In-home observations done at age 3, making it possible to collect detailed measures of the home environment. 1,699 children
Variables Income averaged over 3 periods Child outcomes: PPVT Interviewer’s assessment of behavior Mother reported: Aggressive behavior Withdrawn behavior Anxious behavior
Regression models Convert outcomes and home environment measures to z-scores. Estimate three ways: Controls for age, gender and city Extended SES controls (race, education, mother’s PPVT) Experiment with IV strategies to handle measurement error bias.
Are associations stronger for poorest children? Answer: No
Question 1 summary With a few exceptions, income has larger associations with material aspects of the environment. Adding extended SES controls generally reduces coefficients, and IV (for measurement error) has only small effects. Estimates for child outcomes are in line with previous literature.
Question 2 How are measures of the home environment related to child outcomes?
Question 2 Summary The association between children’s outcomes and income declines (a lot) when controls for the child’s home environment are included. Parenting matters more than maternal mental health and the physical environment.
How should these results be interpreted? The mediation model—in which income affects children’s outcomes through the home environment—is correct. Aspects of the home environment may not be mediators, but may influence income (or be correlated with things that do). The interpretation chosen has important implications for policy analysis.
Question 3 How will income transfer programs affect children’s outcomes?
We look at two policies: Case 1: Bring all families up to the poverty line. Case 2: Give an income transfer of $2400 per child ($3600 per infant) for families with incomes under $60K (Duncan and Magnuson). Look at average differences between poor, near poor and “upper income”.
Conclusions Even under the most “generous” interpretation, simulated effects of income transfers are relatively small. Raising all families to the poverty line (at a cost of $9000 per family per year at a minimum) produces (at most) a 1/5 of a standard deviation increase in the PPVT. Alternatives? Possibly high quality child care.