Academic Studies Underscore Benefits of Government Assistance to Poor - Higher Education
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Academic Studies Underscore Benefits of Government Assistance to Poor

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by Lydia Lum


The sons of female beneficiaries of the U.S. government’s first welfare program for mothers tended to live longer, attain more education and earn higher income than their peers whose mothers were rejected from the program.

More recently, young children of families who, under a 1990s government initiative, moved from public housing to neighborhoods with less poverty tended to have increased college attendance and adult earnings than children who stayed behind.

These outcomes are explained in two new academic studies. They are the most recent contributions to ongoing national discourse over whether public assistance can improve long-term outcomes for low-income children. Results of both studies are published in this month’s issue of the American Economic Review.

The first study, titled “The Long-Run Impact of Cash Transfers to Poor Families,” examined Mother’s Pensions, a federal welfare initiative for single mothers with dependent children that lasted from 1911 to 1935.

The program’s administrative records showed that the financial assistance represented 12 to 25 percent of total family income and lasted about three years. Data was collected on 16,000 boys in 11 states who were born between 1900 and 1925. About 14 percent of the boys came from families whose welfare applications were rejected.

Based on census and death records, researchers found that the sons of women receiving cash assistance lived about one year longer, attained about four months more schooling and earned 14 percent more income as adults than did the sons of female applicants who were rejected for the program.

“Because income transfers were the only major public benefit that poor children were eligible for until 1950 — with the exception of public schooling — the results can be interpreted as the effect of cash transfers alone,” the authors said.

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Interestingly, among the poorest families, the sons of women receiving cash assistance lived 18 months longer than their peers whose families did not.

Women whose applications were rejected tended to have smaller families and older children who were almost old enough to seek jobs. Typically, the participating women were raising children alone because the children’s fathers were deceased or hospitalized long term or were in prison.

Researchers found that boys whose mothers were denied program access were less likely to attend high school. Meanwhile, their peers whose mothers received payments were more likely to finish high school.

Researchers also matched Mothers’ Pension records to World War II enlistment records for the cohort that enlisted in the Army between 1938 and 1946 to study height and weight of the men, because weight and height are markers of childhood nutritional deprivation.

The sons of families receiving cash transfers had a 50 percent decrease in malnutrition, the researchers said.

The study was co-authored by Dr. Anna Aizer, a Brown University associate professor of economics and public policy, Dr. Shari Eli, a University of Toronto assistant professor of economics, Dr. Joseph Ferrie, a Northwestern University economics professor and Dr. Adriana Lleras-Muney, a University of California, Los Angeles economics professor.

“While conditions today differ significantly from those at the beginning of the 20th century, three similarities remain,” the authors wrote. “Then and now, women raising children alone represent the most impoverished families. In fact, the income gap between children in two-parents versus single-mother families has only grown over time. Secondly, the relationship between parental income and the development of child human capital is similar in these two periods.

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“Finally, our estimated short- and medium-term effects are consistent with estimates of the impact of contemporary anti-poverty programs on short- and medium-term outcomes,” the authors continued. “Our results suggest that the short- and medium-term improvements observed in these contemporary programs are likely to generate large longevity gains for the recipients.”

In the second academic study, titled “The Effects of Exposure to Better Neighborhoods on Children,” researchers analyzed the long-term educational and economic outcomes of low-income families who participated in a U.S. Department of Housing and Urban Development (HUD) experiment from 1994 to 1998.

The experimental program, known as Moving to Opportunity, enrolled 4,600 families in five U.S. cities: Baltimore, Boston, Chicago, Los Angeles and New York. Moving to Opportunity offered vouchers to randomly selected families to move from housing projects to neighborhoods with less poverty.

Among participants, only about one-third of the household heads held high school diplomas, only one-fourth were employed and about one-fourth had become parents when they were teens.

Using federal income tax records and HUD files on participant families, researchers found that youths who moved out of the projects prior to age 13 tended to have increased college attendance and higher earnings as adults.

Specifically, moving a child out of public housing to a lower-poverty area when young — age 8 on average — would likely increase a child’s lifetime earnings by about $302,000. It increased by $3,477 the individual earnings in early adulthood for children who moved prior to age 13.

Increased earnings of youths-turned-adults led to taxpayer benefits, too. Children whose families used the Moving to Opportunity vouchers before age 13 paid an extra $394 a year in federal income taxes during their mid-20s. If these higher taxes continue, the researchers said, the additional tax revenue will offset the cost of the HUD voucher that replaced public housing.

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“Thus, housing vouchers which require families to move to lower-poverty areas can reduce the intergenerational persistence of poverty and ultimately save the government money,” the authors wrote.

There were no differences in outcomes among children by gender or by race. Also, there were no effects on economic outcomes for adults.

However, teens age 13 and older who moved out of the projects didn’t have as many improved outcomes, perhaps because the change disrupted their lives and personal development, the researchers said.

The study was co-authored by Dr. Raj Chetty, a Stanford University economics professor, Dr. Nathaniel Hendren, a Harvard University assistant professor of economics and Dr. Lawrence Katz, a Harvard economics professor.

“The duration of exposure to better environments during childhood is important,” the authors wrote. “Every extra year of exposure to a low-poverty environment during childhood is beneficial.

 

“The amount of exposure to better neighborhoods during childhood — rather than total lifetime exposure — matters for long-term economic success,” the authors continued. “[These] children’s outcomes do not arise from improvements in family income. Instead, they are likely driven by direct effects of neighborhood environments on the children.”

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