This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2025
  4. Program
  5. Public Assistance, Parents, and Children
« Back to Results

Public Assistance, Parents, and Children

Paper Session

Friday, Jan. 3, 2025 2:30 PM - 4:30 PM (PST)

Hilton San Francisco Union Square, Union Square 21
Hosted By: Econometric Society
  • Chair: Manasi Deshpande, University of Chicago

Designing Cash Transfers in the Presence of Children's Human Capital Formation

Joseph Mullins
,
University of Minnesota

Abstract

This paper finds that accounting for the human capital development of children has a quantitatively large effect on the true costs and benefits of providing cash assistance to single mothers in the United States. A dynamic model of work, welfare participation, and parental investment in children introduces a formal apparatus for calculating costs and benefits when individuals respond to incentives. The model provides a tractable outcome equation in which a policy's effect on child skills can be understood through its impact on two economic resources in the household – time and money – and the share of each resource as factors in the production of skills. These key causal parameters are cleanly identified by policy variation through the 1990s. The model also admits simple and interpretable formulae for optimal nonlinear transfers in the style of Mirrlees (1971), with novel features arising when child skill formation is accounted for. Using a broadly conservative empirical strategy, estimates imply that optimal transfers are about 20% more generous than the US benchmark, and shaped very differently. In contrast to current policies, the optimal policy discourages labor supply at the bottom of the income distribution due to the costly estimated impacts of work on child development. The finding underscores the importance of reconciling results in the literature on the developmental effects of maternal employment. Finally, a counterfactual model exercise suggests that changes to the welfare and tax environment after 1996 had negative average effects both on maternal welfare and child skill outcomes, with a significant degree of redistribution across latent dimensions.

The Long-Term Effects of Income for At-Risk Infants: Evidence from Supplemental Security Income

Gloria Aldana
,
U.S. Census Bureau
Amelia Hawkins
,
Brandeis University
Christopher Hollrah
,
University of Michigan
Sarah Miller
,
University of Michigan
Laura R. Wherry
,
New York University
Mitchell D. Wong
,
University of California-Los Angeles

Abstract

This paper examines whether a generous cash intervention early in life can "undo" some of the
long-term disadvantage associated with poor health at birth. We use new linkages between
several large-scale administrative datasets to examine the short-, medium-, and long-term effects
of providing low-income families with low birthweight infants support through the Supplemental
Security Income (SSI) program. This program uses a birthweight cutoff at 1200 grams to
determine eligibility. We find that families of infants born just below this cutoff experience a
large increase in cash benefits totaling about 27%of family income in the first three years of the
infant's life. These cash benefits persist at lower amounts through age 10. Eligible infants also
experience a small but statistically significant increase in Medicaid enrollment during childhood.
We examine whether this support affects health care use and mortality in infancy, educational
performance in high school, post-secondary school attendance and college degree attainment, and
earnings, public assistance use, and mortality in young adulthood for all infants born in California
to low-income families whose birthweight puts them near the cutoff. We also examine whether
these payments had spillover effects onto the older siblings of these infants who may have also
benefited from the increase in family resources. Despite the comprehensive nature of this early
life intervention, we detect no improvements in any of the study outcomes, nor do we find
improvements among the older siblings of these infants. These null effects persist across several
subgroups and alternative model specifications, and, for some outcomes, our estimates are precise
enough to rule out published estimates of the effect of early life cash transfers in other settings.

The Effect of Reducing Welfare Access on Employment, Health, and Children’s Long-Run Outcomes

Jeffrey Hicks
,
University of Toronto
Gaëlle Simard-Duplain
,
Carleton University
David Green
,
University of British Columbia
William Porter Warburton
,
Enterprise Economic Consulting

Abstract

Welfare caseloads in North America halved following reforms in the 1990s and 2000s. We study how this shift affected families by linking Canadian welfare records to tax returns, medical care, educational attainment, and crime data. We find substantial and heterogeneous employment responses that increased average income despite reduced transfers. We find zero effects on aggregate healthcare costs, but mothers saw reduced preventative care and increased mental health treatment, consistent with the transition to employment elevating time pressure and stress. We find no effect on teenagers’ education or criminal charges as young adults but find some evidence of intergenerational welfare transmission.

How Disability Benefits in Early Life Affect Adult Outcomes

Manasi Deshpande
,
University of Chicago
Alessandra Voena
,
Stanford University
Jason Weitze
,
Stanford University

Abstract

We use three sources of variation in childhood SSI receipt to identify the effects of receiving Supplemental Security Income (SSI) in childhood on adult outcomes and the channels through which these effects operate. We find heterogeneous effects of SSI that vary with the parental earnings response to SSI benefits: SSI has positive effects on children when parents do not adjust their labor supply in response to SSI income, but zero or negative effects on children when parents reduce their earnings in response to SSI income. These results suggest that consumption is important in human capital production relative to parent time. We estimate a model of maternal labor supply and child human capital formation to decompose the effect of SSI into channels and quantify the relative importance of those channels. Our findings indicate that 1) the income effects of SSI on children's human capital are substantial, while the perverse incentive effects are relatively small, and 2) parent work on net improves children's outcomes by increasing household consumption, despite the potential decrease in parental time.

Discussant(s)
Amelia Hawkins
,
NBER
Joseph Mullins
,
University of Minnesota
Jeffrey Hicks
,
University of Toronto
Manasi Deshpande
,
University of Chicago
JEL Classifications
  • I3 - Welfare, Well-Being, and Poverty