The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit

By Gordon B. Dahl, Lance Lochner. Social Science Research Network, 2012

1,101 citations recorded by the source corpus.

Past estimates of the effect of family income on child development have often been plagued by endogeneity and measurement error. In this paper, we use an instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100, between 1993 and 1997. Using a panel of roughly 4,500 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity, endogenous transitory income shocks, and measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6% of a standard deviation in the short-run. Test gains are larger for children from disadvantaged families and are robust to a variety of alternative specifications.

Subfields: Accounting, Economics and Econometrics, Gender Studies

View Paper: https://www.semanticscholar.org/paper/ab5493d1a7988a756507c7fa174c50722c91af3a

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Citations in the corpus

What Linear Estimators Miss: The Effects of Family Income on Child Outcomes (2011, methodology): “For example, the fact that Dahl and Lochner (2008) report substantial positive effects of family income, whereas Løken (2010) finds little if any effect, may simply be because of nonlinearities: While the Earned Income Tax Credit welfare reform instrument used in the former study primarily changed t”
The effects of poverty on the mental, emotional, and behavioral health of children and youth: implications for prevention. (2012, background): “The EITCs effects on childrens school performance have been evaluated in a study by Dahl and Lochner (2008), who found that with each increase of $1,000 brought about by income tax credits, childrens performance on reading and math standardized tests increased by about 0.”
Wealth, Health, and Child Development: Evidence from Administrative Data on Swedish Lottery Players* (2016, background): “, Akee, Copeland, Keeler, Angold, and Costello (2010), Dahl and Lochner (2012), Duncan, Morris, and Rodrigues (2011), Milligan and Stabile (2011), Salkind and Haskins (1982) and Sacerdote (2007). 2 For details on the Charlson index, see Online Appendix section 6.”
Childhood Circumstances and Adult Outcomes: Act II (2018, neutral): “Two papers, by Hoynes, Miller, and Simon (2015) and Dahl and Lochner (2012) examine the effect of the U.”
Persistent poverty and children's cognitive development: evidence from the UK Millennium Cohort Study (2016, methodology): “Dahl and Lochner (2012) used an instrumental variable approach to establish causality from family income to child development.”
2017-03 Early and Late Human Capital Investments, Borrowing Constraints, and the Family (2012, positive): “…studies demonstrate that exogenous increases in family income lead to real increases in child investments and improvements in child development (Løken 2010, Duncan, Morris and Rodrigues 2011, Milligan and Stabile 2011, Dahl and Lochner 2012, Løken, Mogstad and Wiswall 2012, Jones, et al. 2015).”