Income and Child Well-Being

My topic this afternoon is the link between family income and the
well-being of children. While it is easy to document the better health and 
higher achievement of children who have grown up in richer as opposed 
to poorer families, it is much harder to isolate the causal impact of 
income itself. Children growing up in higher income families are
advantaged in many other ways, including having parents who have 
completed more formal schooling and are embedded in higher-status
social networks, and whose genetic endowments may provide cognitive
and health-related advantages. 

The question I seek to answer concerns the impact of income itself
and takes the form of a policy thought experiment: by how much would 
we expect a child’s well-being to improve if that child’s family were 
unexpectedly given more income through, say, a more generous child 
allowance? 

In attempting to answer this question I will first discuss relevant 
models of child development from economics and developmental
psychology and then document some of the differences in well-being 
between high and low income children. I will then review some of the 
empirical studies of the links between income and child achievement. In
my review I will begin with cross-sectional evidence, move next to 
longitudinal studies and then consider some recent innovative studies 
that use natural and random-assignment experiments and instrumental
variables methods. I will conclude with some thoughts about the policy 
implications of the results from these studies.