TY - JOUR AU - Dahl,Gordon B. AU - Lochner,Lance TI - The Impact of Family Income on Child Achievement JF - National Bureau of Economic Research Working Paper Series VL - No. 11279 PY - 2005 Y2 - April 2005 UR - http://www.nber.org/papers/w11279 L1 - http://www.nber.org/papers/w11279.pdf N1 - Author contact info: Gordon Dahl Department of Economics University of California, San Diego 9500 Gilman Drive #0508 La Jolla, CA 92093-0508 Tel: 858-822-0644 E-Mail: gdahl@ucsd.edu Lance Lochner Department of Economics, Faculty of Social Science University of Western Ontario 1151 Richmond Street, North London, ON N6A 5C2 CANADA Tel: 519/661-2111 ext. 85281 Fax: 519/661-3666 E-Mail: llochner@uwo.ca AB - Understanding the consequences of growing up poor for a child's well-being is an important research question, but one that is difficult to answer due to the potential endogeneity of family income. Past estimates of the effect of family income on child development have often been plagued by omitted variable bias and measurement error. In this paper, we use a fixed effect instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our primary source of identification comes from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100. Using a panel of over 6,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity and endogenous transitory income shocks as well as measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises math test scores by 2.1% and reading test scores by 3.6% of a standard deviation. The results are even stronger when looking at children from disadvantaged families who are affected most by the large changes in the EITC, and are robust to a variety of alternative specifications. ER -