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American Economic Review: Vol. 102 No. 5 (August 2012)

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The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit

Article Citation

Dahl, Gordon B., and Lance Lochner. 2012. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit." American Economic Review, 102(5): 1927-56.

DOI: 10.1257/aer.102.5.1927

Abstract

Using an instrumental variables strategy, we estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, nonlinear changes in the Earned Income Tax Credit. The largest of these changes increased family income by as much as 20 percent, or approximately $2,100, between 1993 and 1997. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run. Test gains are larger for children from disadvantaged families and robust to a variety of alternative specifications. (JEL H24, H31, I21, I38, J13)

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Authors

Dahl, Gordon B. (U CA, San Diego)
Lochner, Lance (U Western Ontario)

JEL Classifications

H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
H31: Fiscal Policies and Behavior of Economic Agents: Household
I21: Analysis of Education
I38: Welfare and Poverty: Government Programs; Provision and Effects of Welfare Programs
J13: Fertility; Family Planning; Child Care; Children; Youth


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