Child tax benefits’ effects on hard skills and soft skills

Early childhood policy is more than preschool, child care and parenting assistance programs. It also includes broader policies that may affect the quality of child development, including policies that affect parental income. Such policies include macroeconomic policies to reduce unemployment, job training policies targeted at parents, and social welfare policies that provide cash or in-kind assistance to parents.

A good recent paper by Kevin Milligan and Mark Stabile provides evidence on how government “child tax benefits” affect children’s achievement and social skills. (The paper is being published in August 2011 in the American Economic Journal: Economic Policy. A free working paper version of the paper is available here. ) The particular program they examine is in Canada, but it has some similar features to the Earned Income Tax Credit in the U.S. Under such programs, the government provides some type of cash assistance to families based on income and number of children. The Canadian program is more generous to families with very low income, whereas the U.S. EITC requires some earnings. The program benefits phase out as family income increases.

The paper finds that higher levels of child benefits increase literacy test scores from ages 4 to 6, and math test scores from ages 6 to 10, for boys whose mothers have high school education or less. The paper also finds that higher child benefits reduce physical and social aggressive behavior among girls whose mothers have a high school education or less. The estimated effects are often large.

Broader income support policies to help parents with children can complement preschool programs and other programs that provide families with services. Higher family incomes may reduce various stresses, such as being forced to move, that negatively affect child development. Higher incomes may provide parents with greater peace of mind or time to do a better job of parenting. Better early childhood services such as preschool may then build on this improved child development.

About timbartik

Tim Bartik is a senior economist at the Upjohn Institute for Employment Research, a non-profit and non-partisan research organization in Kalamazoo, Michigan. His research specializes in state and local economic development policies and local labor markets.
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