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Parents' Incomes and Children's Outcomes: A Quasi-experiment Using Transfer Payments from Casino Profits

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  • Randall K. Q. Akee
  • William E. Copeland
  • Gordon Keeler
  • Adrian Angold
  • E. Jane Costello

Abstract

We examine the role an exogenous increase in household income, due to a government transfer unrelated to household characteristics, plays in children's long-run outcomes. Children in affected households have higher levels of education in their young adulthood and a lower incidence of criminality for minor offenses. Effects differ by initial household poverty status. An additional $4,000 per year for the poorest households increases educational attainment by one year at age 21, and reduces the chances of committing a minor crime by 22 percent for 16 and 17 year olds. Our evidence suggests improved parental quality is a likely mechanism for the change. (JEL D14, H23, I32, I38, J13)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 2 (2010)
Issue (Month): 1 (January)
Pages: 86-115

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Handle: RePEc:aea:aejapp:v:2:y:2010:i:1:p:86-115

Note: DOI: 10.1257/app.2.1.86
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References

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  1. Løken, Katrine V., 2010. "Family income and children's education: Using the Norwegian oil boom as a natural experiment," Labour Economics, Elsevier, Elsevier, vol. 17(1), pages 118-129, January.
  2. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2005. "Why the Apple Doesn't Fall Far: Understanding Intergenerational Transmission of Human Capital," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 437-449, March.
  3. Esther Duflo, 2003. "Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa," World Bank Economic Review, World Bank Group, World Bank Group, vol. 17(1), pages 1-25, June.
  4. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(1), pages 249-275, February.
  5. Arnaud Chevalier & Colm Harmon & Vincent O'Sullivan & Ian Walker, 2005. "The impact of parental income and education on the schooling of their children," IFS Working Papers, Institute for Fiscal Studies W05/05, Institute for Fiscal Studies.
  6. Joyce J. Chen, 2006. "Migration and Imperfect Monitoring: Implications for Intra-Household Allocation," American Economic Review, American Economic Association, American Economic Association, vol. 96(2), pages 227-231, May.
  7. Jo Blanden, 2004. "Family Income and Educational Attainment: A Review of Approaches and Evidence for Britain," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 20(2), pages 245-263, Summer.
  8. Eric Maurin, 1999. "The Impact of Parental Income on Early Schooling Transitions : A Re-examination Using Data over Three Generations," Working Papers, Centre de Recherche en Economie et Statistique 99-69, Centre de Recherche en Economie et Statistique.
  9. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
  10. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, Econometric Society, vol. 46(1), pages 69-85, January.
  11. Jeffrey R. Kling & Jens Ludwig & Lawrence F. Katz, 2005. "Neighborhood Effects on Crime for Female and Male Youth: Evidence from a Randomized Housing Voucher Experiment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 120(1), pages 87-130, January.
  12. Jo Blanden & Paul Gregg, 2004. "Family income and educational attainment : a review of approaches and evidence for Britain," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 333, London School of Economics and Political Science, LSE Library.
  13. Erik Plug & Wim Vijverberg, 2003. "Schooling, Family Background, and Adoption: Is It Nature or Is It Nurture?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(3), pages 611-641, June.
  14. Lance Lochner & Enrico Moretti, 2004. "The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 155-189, March.
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Citations

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Cited by:
  1. Michael Clemens & Erwin Tiongson, 2012. "Split Decisions: Family finance when a policy discontinuity allocates overseas work," CReAM Discussion Paper Series 1234, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  2. Gelber, Alexander & Isen, Adam, 2013. "Children's schooling and parents' behavior: Evidence from the Head Start Impact Study," Journal of Public Economics, Elsevier, Elsevier, vol. 101(C), pages 25-38.
  3. Lundberg, Shelly & Pollak, Robert, 2013. "Cohabitation and the Uneven Retreat from Marriage in the U.S., 1950-2010," IZA Discussion Papers 7607, Institute for the Study of Labor (IZA).
  4. Hjalmarsson, Randi & Lindquist, Matthew J., 2011. "The Origins of Intergenerational Associations in Crime: Lessons from Swedish Adoption Data," Working Paper Series 11/2011, Swedish Institute for Social Research.
  5. Björklund, Anders & Jäntti, Markus, 2012. "How important is family background for labor-economic outcomes?," Labour Economics, Elsevier, Elsevier, vol. 19(4), pages 465-474.
  6. Gennetian, Lisa A. & Castells, Nina & Morris, Pamela A., 2010. "Meeting the basic needs of children: Does income matter?," Children and Youth Services Review, Elsevier, Elsevier, vol. 32(9), pages 1138-1148, September.
  7. Brian Jacob & Max Kapustin & Jens Ludwig, 2014. "Human Capital Effects of Anti-Poverty Programs: Evidence from a Randomized Housing Voucher Lottery," NBER Working Papers 20164, National Bureau of Economic Research, Inc.
  8. Eva Deuchert & Christina Felfe, 2013. "The Tempest: Natural Disasters, Early Shocks and Children's Short- and Long-Run Development," CESifo Working Paper Series 4168, CESifo Group Munich.
  9. Alexander Gelber & Matthew Weinzierl, 2012. "Equalizing Outcomes vs. Equalizing Opportunities: Optimal Taxation when Children's Abilities Depend on Parents' Resources," Harvard Business School Working Papers 13-014, Harvard Business School, revised Mar 2014.
  10. Emma Tominey, 2010. "The Timing of Parental Income and Child Outcomes: The Role of Permanent and Transitory Shocks," Discussion Papers, Department of Economics, University of York 10/21, Department of Economics, University of York.

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