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Institute for Research on Poverty University of Wisconsin - Madison Do Child Maintenance Policies Improve Children’s Economic Well-being in Both Developing.

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Presentation on theme: "Institute for Research on Poverty University of Wisconsin - Madison Do Child Maintenance Policies Improve Children’s Economic Well-being in Both Developing."— Presentation transcript:

1 Institute for Research on Poverty University of Wisconsin - Madison Do Child Maintenance Policies Improve Children’s Economic Well-being in Both Developing and Developed Countries? The Case of Colombia and the US Laura Cuesta Daniel R. Meyer

2 Overview of talk I. Background II. Data and Methods III. Results IV. Summary and Next Steps

3 I. BACKGROUND

4 Motivation  Single-parent families prevalent, and increasing  Increased in 24/25 OECD countries between mid-1980s and mid-2000s  Single-parent families economically vulnerable in most countries  Poverty rates quite high, over 30% in mid- 2000s in 14 OECD countries (wide range of countries: US, Japan, Mexico, Netherlands)

5 Motivation  Most countries have a variety of policies designed to increase income security for children who do not live with both parents.  Child Maintenance (CM) has the potential to improve children’s economic well-being  But is CM policy working? Is it associated with lower poverty in different types of countries?  Reductions in child poverty by 10 pp in the mid- 2000s in 8/22 OECD countries.  Very little is known in developing countries

6 Contributions of this paper  There is no published research on custodial-parent families in Colombia and their economic well-being or their income sources  CM policy may be important at improving the economic well-being of Colombian children in these families - but there is no information  Study focus on two very different countries:  Colombia: very little is known about CM  US: substantial amount is known about CM  This stage of the study is mostly focused on Colombia  US data used as a benchmark

7 Research questions  What is the extent of the problem?  Did custodial-parent families increase during the last decade?  Are they economically vulnerable?  What are child maintenance outcomes?  Do child maintenance policies improve children’s economic well-being in both developing and developed countries? (not done yet)

8 IndicatorColombiaUS Population44 million311 million GDP Per Capita (PPP)US$ 8,959US$ 46,653 Unemployment Rate10.6%5.8% Life Expactancy at Birth7379.6 Mean Years of Schooling7.412.4 Poverty Rate45.5%13.2% Income Gini Coefficient58.540.8 Basic Data: Colombia & US (2008) Source: UNDP 2010 International Human Development Indicators. Poverty defined within each country. Poverty and unemployment rates for Colombia taken from DANE. US poverty rates taken from Census Bureau and US unemployment rates taken from BLS.

9 Child Maintenance Overview Parents separation or divorce Parents decide where child will live (assume Mom)  Mom ask Dad for financial help.  They may agree to an amount, which may be paid voluntarily. If they cannot agree, she may request help from the NIFW or go straight to court.  Amount varies from case to case.  Amounts paid privately and voluntarily.  If not paid, she can sue. If succesful, the order can be withheld from his wages. If he does not pay, he could go to jail. Same She may request help from the CSA  Amount to be transfered (the order) set by formula.  Orders automatically withheld from wages.  CSA monitors payments, and will take actions if he falls behind. Jail is possible Colombia US

10 II. DATA AND METHODS

11 AspectsColombiaUS SourcesQuality of Life Survey (QLS)Current Population Survey (CPS), Child Support Supplement Child Maintenance Only two questions on CM (receipt and amount) Variety of questions on CM Type of surveyCross-sectional, every other year Other variablesDemographics, education, income, labor market, expenditures. Demographics, education, income, and labor market Custodial-parent Sample 1997 Sample: 2101 2008 Sample: 4179 1997 and 2007 sample: ~3000 Data

12 Methods  Straightforward Descriptive Analyses  Estimating poverty with and without child maintenance – Family is the unit of analysis: Custodial parent + her/his children (if single) Custodial parent + her/his children + partner (if married or cohabitating) – Not making causal claims. Accounting exercise.  Using each country’s official definition of poverty – Emphasizes context of poverty (within-country) rather than trying to do formal cross-country comparisons

13 III. RESULTS

14 What is the extent of the problem in each country? Did custodial-parent families increase during the last decade?

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17 What is the extent of the problem in each country? Did custodial-parent families increase during the last decade? YES Are they economically vulnerable?

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19 Family Monthly Income (Means) Group ColombiaUS 1997200819972007 All(PPP US$)(2007 US$) Moms2793732,0172,286 Dads3375263,9043,839 Source: Authors’ Calculations based on QLS (Colombia) and CPS (US). Table shows means among those with incomes greater than zero.

20 Poverty Rates Group ColombiaUS 1997200819972007 Total Population52.7%45.5%13.3%12.5% Custodial Parents Moms75.8%82.8%32.1%27.0% Dads38.6%61.4%10.4%12.9% Source: Authors’ Calculations based on QLS (Colombia) and CPS (US). Poverty defined within each country. Figures for total population taken from López & Núñez 2007, DANE- DNP-MESEP (Colombia) and Census Bureau (US).

21 Why are incomes so low and poverty rates so high in Colombia?  Low levels of human capital mean low earnings (and often informal sector work) – 63% (moms) - 68 (dads)% of custodial parents in Colombia are without a secondary (high school) degree  Few other income sources – Relatively low levels of public transfers – One of our questions: are there private transfers that can fill this gap?

22 Child Maintenance Outcomes in Each Country

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24 Monthly Amounts Received (Means) Group ColombiaUS 1997200819972007 All(PPP US$)(2007 US$) Moms138215395365 Dads7879396376 Source: Authors’ Calculations based on QLS (Colombia) and CPS (US).

25 What % of Family Income is Child Maintenance? Group ColombiaUS 1997200819972007 All(PPP US$)(2007 US$) Moms39%44%16%14% Dads17%18%9%10% Below PL Moms58%59%34%39% Dads-30%60%29% Source: Authors’ Calculations based on QLS (Colombia) and CPS (US).

26 Is Child Maintenance Pulling Some Custodial Parents Out of Poverty in Colombia?

27 Child Maintenance and Poverty  Of mothers who are estimated to be poor without child maintenance, what percentage were brought out of poverty after including CM? (Almost no fathers were brought out of poverty) 19972008 Moms4.0%4.8% Source: Authors’ Calculations based on QLS (Colombia).

28 Child Maintenance and Extreme Poverty  Of mothers who are estimated to be extremely poor without child maintenance, what percentage were brought out of extreme poverty after including CM? (Almost no fathers were brought out of extreme poverty) Source: Authors’ Calculations based on QLS (Colombia). 19972008 Moms8.5%8.8%

29 V. SUMMARY AND NEXT STEPS

30 Summary of Results for Colombia What is the extent of the problem? – Did custodial-parent families increase during the last decade? YES – Are they economically vulnerable? YES What are child maintenance outcomes? – Few custodial parents receive; amounts tend to be low; but for those who receive something, it’s a substantial part of their income package

31 Similarities and Differences between US & Colombia Similarities 1. Higher poverty rates than the total population 2. Custodial mother families more likely to be poor 3. Low child maintenance receipt – dads Differences 1. Growth rate is higher in Colombia (19% Vs 9%) 2. Poverty rates are substantially higher in Colombia 3. Child maintenance as a % of family total income is more important for custodial parents in Colombia than in the US

32 Next Steps for this Project All analyses to date use families as unit of analysis; we plan to focus on children rather than families We will analyze data on individual families and children in the US (so far only using published tables) We plan to conduct descriptive regressions that examine characteristics associated with receiving child maintenance and models comparing whether characteristics are the same across the two countries

33 Future Research  What is the potential of child maintenance in Colombia? – Are we already collecting as much as is possible because incomes are so low?  Is there a causal effect of receiving child support?  Is child support more important than other sources of income (perhaps because it has important symbolic meaning)?

34 THANK YOU

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37 Key Policy Approach: Child Maintenance (Child Support) ColombiaUS Background  First provisions enacted in 1946  Major reforms were enacted in 1968, 1989 and 2006  System evolved from a court-based regime to a combination of courts and a public agency  Prior to 1970s was a court-based regime  Major reforms enacted in 1974, 1988, and 1996.  Decentralized (states have somewhat different approaches)  System now combines courts and public agencies Key Actors  Judicial System  **The NIFW  Local governments  Federal OCSE  **State CSAs  Judicial System

38 Key Policy Approach: Child Maintenance (Child Support) ColombiaUS Alternative arrangements  None  Private  Private arrangement with NIFW intervention  Arrangement with intervention of judicial system  None  Private arrangement  Arrangement with intervention of Child Support Agency  Arrangement in judicial system (no CSA) Types of orders  Private agreement  Court order  Private agreement  Court ourder Interaction with welfare system  May affect eligibility for programs but not the amount of the subsidy  Affects both program eligibility and amount of subsidy received

39 Key Policy Approach: Child Maintenance (Child Support) ColombiaUS Operation Order establishment Order revisions  Collection  Monitoring  Enforcement  No formula, but maximum of 50% of non-resident parent’s wage  Updated every year in a percentage that is, at least, equal to the inflation rate.  Withholding from wages only in response to delinquency then sent through court; otherwise private  None  Only if it is requested by custodial parent  Formula that differs across states  Updating is not common  Withholding from wages is routine; sent through public agency  CSA (if CSA case)  CSA

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