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The Hutchins Center Explains: Why programs for young children are long-term investments

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There is mounting and dramatic evidence that transfers to low-income families early in children’s lives have impacts that last well beyond the childhood years. As Kristin Butcher argues in a Hutchins Center Working Paper, work from across disciplines has developed a robust body of research indicating that children’s environment in the prenatal, neonatal, and early childhood periods can profoundly affect the capacities that children develop. These capacities persist into adulthood, affecting earnings, health, and other life outcomes.

1. What adverse in utero and early childhood circumstances have been shown to affect adult outcomes?

A number of factors during pregnancy and early childhood have been linked to adult earnings, educational attainment, and health outcomes. They include:

2. Is there evidence that interventions for low-income children have a lasting impact on adult outcomes?

Yes. Evidence suggests that programs targeting low-income families with children improve long-term health, education, and employment prospects.

In-kind benefit programs. Programs like SNAP and Medicaid improve early childhood environments and have long-lasting positive effects on a range of adult outcomes, including:

Cash benefits. Programs like the Child Tax Credit and the Earned Income Tax Credit, which provide cash benefits to families, also have long-lasting positive effects on outcomes:

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Cash transfers may also improve long-term outcomes in other ways. More cash for parents may lead to higher spending on enrichment activities or a reduction in work hours that can increase time spent with young children, which in turn can positively influence that child’s development.

3. Does it matter when transfers occur? That is, does the age of the child at the time of intervention affect adult outcomes?

One conclusion that jumps out from all of these studies is that timing matters. Helping children in their earlier years seems to have a larger beneficial impact on long-run outcomes than help received as teenagers.  This result is seen most starkly in the effects of Moving to Opportunity, a program that provided vouchers for families to move out of high-poverty neighborhoods.

Education: For children ages 13 and below, moving to a lower-poverty neighborhood increased the rate of college attendance by 2.5 percentage points and improved the quality of the college attended.

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Income: For children ages 13 and below, moving to a lower-poverty neighborhood significantly improved earnings later in life, raising income in their mid-twenties by 31 percent.  Children who were older than 13 at the time of the move actually had lower income.

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4. Where can I read more about the returns to investing in children?

In addition to the papers below, you can also watch Butcher’s presentation of her paper in this video of a discussion held at the Hutchins Center on Fiscal and Monetary Policy. Other resources include:

Anna Aizer, Laura Stroud, and Stephen Buka. “Maternal Stress and Child Outcomes: Evidence from Siblings.” Journal of Human Resources 51, no. 3 (2015): 523-555. http://www.nber.org/papers/w18422.pdf.

Sandra E. Black, Paul J. Devereux, and Kjell G. Salvanes. “From the Cradle to the Labor Market? The Effect of Birth Weight on Adult Outcomes.” Quarterly Journal of Economics 122, no. 1 (2007): 409-439. http://ftp.iza.org/dp1864.pdf.

David W. Brown, Amanda E. Kowalski, and Ithai Z. Lurie. “Medicaid as an Investment in Children: What is the Long-Term Impact on Tax Receipts?” National Bureau of Economic Research, No. 20835 (2015).http://www.nber.org/papers/w20835.pdf.

Kristin F. Butcher, “Assessing the Long-Run Benefits of Transfers to Low-Income Families,” Hutchins Center on Fiscal & Monetary Policy at Brookings. (2017).

Raj Chetty, John N. Friedman, and Jonah Rockoff, “New Evidence on the Long-Term Impacts of Tax Credits,” Washington, DC: US Internal Revenue Service, November 2011. https://www.irs.gov/pub/irs-soi/11rpchettyfriedmanrockoff.pdf

Raj Chetty, Nathaniel Hendren, and Lawrence F. Katz. “The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Experiment.” American Economic Review 106, no. 4 (2016): 855-902. http://www.nber.org/papers/w21156.pdf.

Gordon Dahl, and Lance Lochner, “The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit,” American Economic Review vol. 102, iss.5 (2012):1927-1956. http://econweb.ucsd.edu/~gdahl/papers/children-and-EITC.pdf.

Greg J. Duncan, Kathleen M. ZIol-Guest, & Ariel Kalil. “Early Childhood Poverty and Adult Attainment, Behavior and Health,” Child Development vol. 81, no. 1, (2010): 306-325. http://www.ipr.northwestern.edu/events/other-events/docs/conf08-attainment/papers/duncan.pdf.

Nicole L. Hair, Jamie L. Hanson, Barbara L. Wolfe, and Seth D Pollack, “Association of Child Poverty, Brain Development, and Academic Achievement,” JAMA Pediatrics, vol. 169, no. 9, (2015): 822-829. http://www.waisman.wisc.edu/childemotion/pubs/2015-AssociationOfChildPovertyBrainDevelopment.pdf.

Hilary Hoynes, Doug Miller, and David Simon, “Income, the Earned Income Tax Credit, and Infant Health,” American Economic Journal: Economic Policy, 7(1), (2015):172-211. http://www.nber.org/papers/w18206.pdf.

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