Assessing the long-run benefits of transfers to low-income families

Should many government transfer programs be considered public investments? If a transfer program affects children’s lives in ways that improve their well-being as adults, that program isn’t much different from a road project or a government-funded scientific breakthrough. A growing body of research finds that transfers to low-income families with children have long-run payoffs. 

This paper surveys the literature on the long-run impact on children of cash transfers, food and nutrition programs, health care and health insurance, and housing initiatives. There is mounting and dramatic evidence that transfers to low-income families early in children’s lives manifest later in life. 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.

Among the findings:

1. Cash transfers: The Earned Income Tax Credit (EITC) appears to have a direct effect on children’s health and educational outcomes. The EITC matters for children in ways that potentially translate into greater productive capacity later in these children’s lives.
2. Food and nutrition programs: Children in counties that were early adopters of food stamps, the predecessor to the Supplemental Nutrition Assistance Program, compared to similar children in other counties, had higher birthweights and lower neonatal mortality, and later in life those who were exposed to food stamps from ages 0-5 had better health outcomes. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) also appears to have a positive effect on birth weight.
3. On health care and health insurance: Medicaid eligibility early in life reduces adult mortality and disability rates, and improves economic outcomes. Providing health insurance early in children’s lives has substantial long-run benefits.
4. On housing programs: There is limited evidence on the long-run impact of the primary government housing programs, but the “Moving to Opportunity” experiment, which paid for participants to move from high-poverty to lower-poverty communities, appears to have had substantial, positive long-run effects on those children who were younger than 13 at the time of the move. As adults, recipients earn more money and live in higher income households. They are more likely to go to college and they attend colleges that are higher quality.

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The author did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. She is currently not an officer, director, or board member of any organization with an interest in this article.