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The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit

  • Gordon B. Dahl
  • Lance Lochner

Using an instrumental variables strategy, we estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, nonlinear changes in the Earned Income Tax Credit. The largest of these changes increased family income by as much as 20 percent, or approximately $2,100, between 1993 and 1997. 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. Test gains are larger for children from disadvantaged families and robust to a variety of alternative specifications. (JEL H24, H31, I21, I38, J13)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.5.1927
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 5 (August)
Pages: 1927-56

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:5:p:1927-56
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  8. Amalia R. Miller & Lei Zhang, 2009. "The effects of welfare reform on the academic performance of children in low-income households," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 28(4), pages 577-599.
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  10. Kevin Milligan & Mark Stabile, 2011. "Do Child Tax Benefits Affect the Well-Being of Children? Evidence from Canadian Child Benefit Expansions," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 175-205, August.
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  22. Løken, Katrine Vellesen & Mogstad, Magne & Wiswall, Matthew, 2011. "What Linear Estimators Miss: The E ects of Family Income on Child Outcomes," Working Papers in Economics 02/11, University of Bergen, Department of Economics.
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