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ERIC Number: ED553241
Record Type: Non-Journal
Publication Date: 2009-Jan
Pages: 44
Abstractor: As Provided
Reference Count: 37
ISBN: N/A
ISSN: N/A
The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit. Discussion Paper No. 1361-09
Dahl, Gordon; Lochner, Lance
Institute for Research on Poverty
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 two simulated instrumental variables strategies 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 percent, or approximately $2,100. Using a panel of almost 5,000 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 percent of a standard deviation in the short run. The gains are larger for children from disadvantaged families and are robust to a variety of alternative specifications. We find little evidence of long-run income effects, with most of the effects disappearing after one year. The following are appended: (1) Methodological Issues; (2) Description of NLSY Children Data; and (3) State-level School Accountability and Welfare Reform Measures.
Institute for Research on Poverty. Publications Department, 1180 Observatory Drive, Madison, WI 53706-1393. Tel: 608-262-6358; Fax: 608-265-3119; e-mail: irppubs@ssc.wisc.edu; Web site: http://www.irp.wisc.edu
Publication Type: Reports - Research; Numerical/Quantitative Data
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: University of Wisconsin-Madison, Institute for Research on Poverty