Parental Income Shocks and Outcomes of Disadvantaged Youth in the United States
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abstract
Government policies that increase the incomes of poor families have been promoted as a way of improving children's life chances on the grounds that children who grow up in rich families tend to have better socioeconomic outcomes as adults than children who grow up in poor families. Understanding which factors contribute to the intergenerational transmission of socioeconomic status is crucial to the development of public policies that improve youth outcomes. The purpose of the analysis in this chapter is to make a convincing case that displacement produces a significant exogenous shock to family income over many years. The chapter estimates the effects of this shock on children's outcomes as young adults. Family income itself, as opposed to the many family characteristics that are correlated with income, plays an important role in determining disadvantaged children's long-run socioeconomic success. Disruptions to family income do seem to compound the difficulties disadvantaged children will face as adults. There is little evidence that such disruptions have measurable negative effects on children who are otherwise relatively advantaged.
