Adoption Subsidies and Adoption Outcomes:

Over half a million children in the United States are currently in foster care, many of whom are at risk for long-lasting emotional and health problems. Because research suggests that adoption may be one of the most promising options for the placement of these at-risk children, various policies have been introduced at all levels of government to encourage adoption. In 1980, Congress passed the Adoption Assistance and Child Welfare Act, which provided federal funds for monthly adoption subsidies designed to promote adoptions of special-needs children and children in foster care. Using data from the Adoption and Foster Care Reporting and Analysis Systems for 20002003, I consider the effects of adoption subsidies on children’s average time to adoption and the characteristics of adoptive families. I employ an instrumental variables strategy to address issues of subsidy endogeneity, where the instrument is a dummy indicating that the child qualifies for “special needs by age” status in his or her state. I find that subsidy receipt and amount are associated with longer times to adoption, and increase the probability that a child is adopted by an individual with characteristics similar to those of a grandmother. ____________________________ * Department of Economics and Econometrics, University of Notre Dame, 436 Flanner Hall, Notre Dame, IN 46556. [email protected].