A decomposition analysis of the relationship between parental income and multiple child outcomes

This paper explores the relationship between family income and six child developmental outcomes in mid-childhood. The outcomes span development in cognitive, emotional, behaviour and health domains. We examine the income gradients in a consistent manner that allows comparison across outcomes and decompose the income gradients into two overlapping sets of pathways. The first operates through observed parental behaviours and their inputs into children that are associated with income. The second captures the influence of other observed family characteristics, such as low parental education, that tend to co-occur with low income. There is also a residual portion of the income gradient that is not associated with observed inputs or measures of parental background and human capital. We find that the extent of the income gradient differs across outcomes. The strongest gradients are associated with cognitive outcomes, the weakest with health outcomes. Some inputs account for part of the explained income gradient across all six child outcomes but it is more common for specific inputs to be strongly associated with a limited number of outcomes. This variation in the role of inputs suggests that the underlying mediators of the social gradients in different domains of child development are not the same.