Class Notes: Paid maternity leave health benefits, addressing family poverty, and more

This week in Class Notes:

• • Paid maternity leave improves mothers’ mental and physical health in the short and medium term.
  • Political connections influenced the allocation of stimulus aid after the Great Recession and caused economic inefficiencies.
  • Race-neutral affirmative action does a worse job at targeting high-achieving minority students than race-based policies.
  • This week’s top chart shows that over three-quarters of Black Americans say Black churches have helped promote racial equality.
  • In this week’s choice op-ed, Naomi Schaefer Riley and Angela Rachidi argue that the solution to family poverty lies in free markets, not a child allowance.
  • Check out our latest piece on why lifting the SALT cap is not economically or politically smart.
• For your calendar: Watch upcoming webinars on algorithmic bias, post-COVID education, and the well-being of small businesses during the pandemic.

Paid maternity leave improves mothers’ mental and physical health in the short and medium term

Maternity leave serves many goals, including care for new-born children and maintaining the connection of mothers to the labor market. But what about the impact on maternal health? Using Norway’s birth registry database and a health survey, Aline Bütikofer and her co-authors assess the short and medium-term maternal health effects of the introduction of a new paid maternity leave policy in 1977, which provided four months of paid leave and 12 months of unpaid leave. Using a regression discontinuity approach, they find that the new policy reduced the probability of obesity among mothers by 39 percentage points, and improved mental health and general health. In the long term, the policy seems to have promoted healthier habits, too, including less daily smoking and more exercise. The findings were largely driven by strong effects for low-income mothers, first-time mothers, and mothers who experienced complications at delivery.

Political connections influenced the allocation of stimulus aid after the Great Recession and caused economic inefficiencies

The 2009 American Recovery and Reinvestment Act (ARRA) aimed to save and create jobs during the Great Recession. Billions of dollars of stimulus grants were paid to firms across the country. Did political connections play a role in the allocation of funds? Joonkyu Choi and his co-authors use micro data on government spending and campaign contributions to address this question. Political connectedness is measured by the number of contributions made by a firm to winning campaigns in close state elections leading up to 2009. Firms that contributed to winning candidates were 64% more likely to secure an ARRA grant, and also received 10% larger grants. Notably, the grants given to politically connected firms were less effective at creating jobs. For every $1 million a non-politically connected firm received, 13 jobs were created. For politically-connected firms, the jobs created estimate is not significantly different from zero.

Race-neutral affirmative action does a worse job at targeting high-achieving minority students than race-based policies

The merits of affirmative action have been hotly debated in policy circles. A key question is whether race-neutral policies can achieve the same level of racial and economic diversity in schools as race-based policies. To help answer this question, Glenn Ellison and Parag A. Pathak study admission to selective high schools in the Chicago Public Schools (CPS) system, which abandoned race-based affirmative action admission policy for a race-neutral one in 2010. Prior to 2010, these schools used explicit racial quotas to ensure student diversity. Since then, CPS has adopted a race-neutral approach, attempting to promote diversity using a neighborhood-based method. This method weighs student applications based on the socioeconomic characteristics of their census tracts. Using a theoretical model, the paper finds that the race-neutral policy is largely inefficient from both a diversity perspective and an academic one. Specifically, about three-quarters of the reduction in average entrance scores that occurred at top schools after the admissions policy changed could have been avoided, while maintaining the same level of racial diversity, with the use of racial quotas. The current CPS plan is also less effective at adding high-achieving, low income students. Interestingly, the within-school achievement gap between racial majority and minority students also widens under the new CPS plan compared to a race-based admissions policy.

Top chart: Over three-quarters of Black Americans say Black churches have helped promote racial equality

This week’s top chart shows that 77% of Black Americans think predominantly Black churches have helped Black people move toward racial equality. Much smaller shares believe that the federal government (55%) or white churches (38%) have helped Black Americans.

Choice opinion: The solution to family poverty lies in free markets, not a child allowance

“Maybe the alliance on the right between social conservatives and free market fans is over. (It is strange to watch social conservatives run into the arms of progressives if they really are concerned about the ability of American families to grow—such a trajectory, according to the left, would only result in environmental destruction and limits on women’s freedom.) Given the political environment, perhaps natalists feel as if they have no choice but to look for other allies. But genuine free market reforms could address poverty and make it easier to raise a family in this country. Just give them a chance,” write AEI’s Naomi Schaefer and Angela Rachidi. 

Self-promotion: Lifting the SALT cap is not economically or politically smart

There are many ways the Democrats can use their Senate majority to reform tax policy, but “one thing they should emphatically not do is lift the cap on the SALT (state and local tax) deduction,” argue Christopher Pulliam and I in our latest piece. Lifting the $10,000 cap on the deduction established under the 2017 Tax Cuts and Jobs Act would serve as a further tax cut for the rich. The top 0.1 percent of households would receive almost $145,000 in average tax cuts while the average middle-class family would get less than $27. Lifting the cap would not only be bad economic policy; it might also be bad from a political standpoint. While strong blue states like New York and California have the most to gain, key swing states like Florida and Nevada are among the states that would benefit the least from a lifted SALT cap. Instead, we propose policies like the establishment of the State Macroeconomic Insurance Fund (SMIF) or the restructuring of Temporary Assistance for Needy Families (TANF) funding to support state and local governments.

For your calendar: algorithmic bias, post-COVID education, and the well-being of small businesses during the pandemic 

Should the government play a role in reducing algorithmic bias?

• • Friday, March 12, 2021 9:00 AM to 10:15 AM EST

Can family engagement be a gamechanger for education post-COVID?

• • Tuesday, March 16, 2021 10:00 AM to 11:00 AM EDT

One year into the pandemic: New evidence on how small businesses are faring

• • Tuesday, March 16, 2021 12:00 PM to 1:00 PM EDT