Does money really matter? Estimating impacts of family income on young children's achievement with data from random-assignment experiments

Abstract

Social scientists do not agree on the size and nature of the causal impacts of parental income on children's achievement. We revisit this issue using a set of welfare and antipoverty experiments conducted in the 1990s. We utilize an instrumental variables strategy to leverage the variation in income and achievement that arises from random assignment to the treatment group to estimate the causal effect of income on child achievement. Our estimates suggest that a $1,000 increase in annual income increases young children's achievement by 5%-6% of a standard deviation. As such, our results suggest that family income has a policy-relevant, positive impact on the eventual school achievement of preschool children.

Figures

Figure 1

Individual study achievement means by income means. E = experimental group; C = control group; FTP = Florida's Family Transition Program; LA-GAIN = Los Angeles Jobs-First Greater Avenues for Independence; SSP = Self-Sufficiency Project; PL = Plus; BC = British Columbia; NB = New Brunswick; MFIP = Minnesota Family Investment Program; IO = Incentives Only; LFA = Labor Force Attachment; HCD = Human Capital Development; CT = Connecticut's Job's First.