The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit / Gordon Dahl, Lance Lochner.

Format:

Book

Author/Creator:

Dahl, Gordon.

Contributor:

National Bureau of Economic Research.

Lochner, Lance.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14599.

NBER working paper series no. w14599

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

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.

Notes:

Print version record

December 2008.