Parents' Incomes and Children's Outcomes: A Quasi-Experiment Using Transfer Payments from Casino Profits

The evidence suggests that improved parental quality is a likely mechanism for the change in children's long run outcomes, and an additional $4000 per year for the poorest households increases educational attainment and reduces having ever committed a minor crime.

Abstract

We examine the role that an exogenous increase in household income due to a government transfer unrelated to household characteristics plays in children's long run outcomes. Children in affected households have higher levels of education in their young adulthood and a lower incidence of criminality for minor offenses. Effects differ by initial household poverty status. An additional $4000 per year for the poorest households increases educational attainment by one year at age 21 and reduces having ever committed a minor crime by 22% at ages 16-17. Our evidence suggests that improved parental quality is a likely mechanism for the change.