Ideas to Action:

Independent research for global prosperity

Research Seminar Series (RSS)

Parents' Incomes and Children's Outcomes: A Quasi-Experiment

Thursday, December 4, 2008 - 12:00pm to 1:30pm

Center for Global Development 
and The Paul H. Nitze School of Advanced International Studies present 
a Massachusetts Avenue Development Seminar (MADS)* 

Featuring 
Randall K. Q. Akee 
Institute for the Study of Labor, Bonn, Germany 

With discussant 
Emanuela Galasso 
Development Economics Research Group, World Bank 

Thursday, December 4, 2008 
12:00pm--1:30pm
Lunch will be served 

at 
Center for Global Development 
1800 Massachusetts Avenue, NW, Third Floor, Washington, DC 
Closest Metro:
Dupont Circle (Red Line)

REGISTER ONLINE

Abstract: Identifying the effect of parental incomes on child outcomes is difficult due to the correlation of unobserved ability and income. This study investigates this effect in a developing country that happens to lie within the United States -- the Eastern Cherokee Indian Reservation. Previous research has relied on the use of instrumental variables to identify the effect of a change in household income on the young adult outcomes of the household’s children. In this research, we examine the role that an exogenous increase in household income due to a government transfer unrelated to household characteristics plays in the long run outcomes for children in affected households. We find that children who are in households affected by the cash transfer program have higher levels of education in their young adulthood and a lower incidence of criminality for minor offenses. These effects differ by initial household poverty status as is expected. We find that an additional $4000 per year for the poorest households increases educational attainment by one year at age 21 and reduces having ever committed a minor crime by 22% at ages 16-17. Second, we explore two possible mechanisms through which this exogenous increase in household income affects the long run outcomes of children -- parental time and parental quality. Parental quality and child interactions show a marked improvement while changes in parental time with child does not appear to matter.

Read Akee's paper (pdf, 394K)

*The Massachusetts Avenue Development Seminar (MADS) series is an effort by the Center for Global Development and The Paul H Nitze School of Advanced International Studies to take advantage of the incredible concentration of great international development scholars in the Metro Washington, DC area. The series seeks to bring together members of this community and improve communication between them.