Low Income Children Essay

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Children from less well-off families are at greater risk than wealthier children for poor cognitive, behavioral and health outcomes. If these associations between children's outcomes and the economic status of their families reflect causal relationships—so that the poorer outcomes of less wealthy children can be attributed to their low incomes—they have implications for the intergenerational transmission of poverty. Children who have worse cognitive, behavioral and health outcomes may be more likely to obtain less education and have lower earnings as adults, and to go on to rear their children in poorer environments. This line of reasoning suggests that policies and programs that improve outcomes for low-income children may break—or at least …show more content…

A critical issue is whether the estimated effects of income on children's outcomes are biased. There are two types of problems that are likely to lead to biased estimates. One is measurement error in income. If the measurement of income is noisy, then classic attenuation bias will bias the coefficient on income toward zero. A similar result will occur if children's outcomes depend on “permanent” rather than transitory income. A common finding from previous research is that the estimated effects of income on children's outcomes are larger when income is averaged over multiple years (see, for example, Blau, 1999, Korenman et al., 1995 and Mayer, 1997). This is consistent with the idea that there is measurement error in income—which is reduced via averaging—or that permanent rather than transitory income is the key determinant of children's outcomes. In this paper, we address this potential problem by averaging family income over the 3 years of our data. The fact that the children in this sample are only age 3, and that we have up to three data points on income over the 3 years (at birth, 1 year post-birth, and 3 years post-birth) gives us confidence that we have a fairly accurate measure of a family's economic resources during the child's lifetime to date. In addition, we experiment with an IV method designed to account for measurement error bias (but not other sources of bias) in our

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