TY  - JOUR
AU  - Dahl,Gordon
AU  - Lochner,Lance
TI  - The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14599
PY  - 2008
Y2  - December 2008
UR  - http://www.nber.org/papers/w14599
L1  - http://www.nber.org/papers/w14599.pdf
N1  - Author contact info:
Gordon Dahl
Department of Economics
University of California, San Diego
9500 Gilman Drive #0508
La Jolla, CA 92093-0508
Tel: 858-822-0644
E-Mail: gdahl@ucsd.edu

Lance Lochner
Department of Economics, Faculty of Social Science
University of Western Ontario
1151 Richmond Street, North
London, ON  N6A 5C2
CANADA
Tel: 519/661-2111 ext. 85281
Fax: 519/661-3666
E-Mail: llochner@uwo.ca
AB  - Past estimates of the effect of family income on child development have often been plagued by endogeneity and measurement error. In this paper, we use an instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100, between 1993 and 1997. Using a panel of roughly 4,500 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity, endogenous transitory income shocks, and measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6% of a standard deviation in the short-run. Test gains are larger for children from disadvantaged families and are robust to a variety of alternative specifications.
ER  -