Improving Child Outcomes through Welfare Reform

This paper investigates how government antipoverty programs in the United States can support the development of disadvantaged children. I accomplish this by formalizing and estimating a model in which maternal investments of time and money determine child outcomes. Mothers choose these investments, their labor supply, and their program participation subject to constraints on their time and budget. I use this structure to answer important policy questions regarding the design and delivery of income supports to poor families. My estimates suggest that boosting child outcomes through sustained income transfers is expensive. However, there are significant returns to providing additional income supports to the poorest families in the sample. I propose a policy reform, based on a minimum guaranteed income standard, that is revenue neutral and significantly improves the cognitive and behavioral skills of the most economically disadvantaged children. When associated with high school graduation, the induced change in skills lifts the probability of graduation by 2.9 percentage points for children in the bottom 10 percent of the income distribution. *Many thanks to Chris Flinn, Gianluca Violante, Pamela Morris, Tobias Salz, Matthew Wiswall, Kevin Thom, David Cesarini, Timothy Christensen, Isaac Baley and Alexander Coutts for many helpful comments and suggestions. All remaining errors are my own.