Investing in Infants: The Lasting Effects of Cash Transfers to New Families / Andrew C. Barr, Jonathan Eggleston, Alexander A. Smith.

Format:

Book

Author/Creator:

Barr, Andrew C.

Contributor:

National Bureau of Economic Research.

Eggleston, Jonathan.

Smith, Alexander A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w30373.

NBER working paper series no. w30373

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2022.

Summary:

We provide new evidence that cash transfers following the birth of a first child can have large and long-lasting effects on that child's outcomes. We take advantage of the January 1 birthdate cutoff for U.S. child-related tax benefits, which results in families of otherwise similar children receiving substantially different refunds during the first year of life. For the average low-income single-child family in our sample this difference amounts to roughly $1,300, or 10 percent of income. Using the universe of administrative federal tax data in selected years, we show that this transfer in infancy increases young adult earnings by at least 1 to 2 percent, with larger effects for males. These effects show up at earlier ages in terms of improved math and reading test scores and a higher likelihood of high school graduation. The observed effects on shorter-run parental outcomes suggest that additional liquidity during the critical window following the birth of a first child leads to persistent increases in family income that likely contribute to the downstream effects on children's outcomes. The longer-term effects on child earnings alone are large enough that the transfer pays for itself through subsequent increases in federal income tax revenue.

Notes:

Print version record

August 2022.