The Impact of Child‐Care Subsidies on Child Development: Evidence from Geographic Variation in the Distance to Social Service Agencies

In this paper, we examine the impact of U.S. child‐care subsidies on the cognitive and behavioral development of children in low‐income female‐headed families. We identify the effect of subsidy receipt by exploiting geographic variation in the distance that families must travel from home to reach the nearest social service agency that administers the subsidy application process. Using data from the Kindergarten cohort of the Early Childhood Longitudinal Study, our instrumental variables estimates suggest that children receiving subsidized child care in the year before kindergarten score lower on tests of cognitive ability and reveal more behavior problems throughout kindergarten. An auxiliary analysis of longer‐run outcomes shows that these negative effects largely disappear by the time children finish first grade.     

The Impact of Child Care Subsidies on Single Mothers’ Work Effort

Access to affordable child care is a formidable barrier to employment for many families. Following passage of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) in 1996 , funding for child care assistance increased dramatically. Using data from the National Survey of America’s Families (NSAF), the impact of child care subsidies on single mother’s work effort is evaluated. The results indicate that not only are women more likely to be employed when they receive child care subsidies, they are also more likely to be employed full time. Single mothers who reported receiving assistance with child care worked, on average, 9.4 hours more per week than mother’s who did not receive help. While growth in funding for child care has slowed in recent years, findings like the ones presented here highlight the importance of affordable child care in the employment decisions of mothers with young children.     

Child Care Subsidies and Employment Behavior Among Very‐Low‐Income Populations in Three States

Using merged administrative data from welfare reform evaluations in three states, we estimate the effects of child care subsidy use on the length of time it takes for a welfare applicant to move into substantial employment. Findings show that the use of a child care subsidy during an unemployed or marginally employed spell of welfare receipt is associated with between a 0.6 and 1.7 quarter (or 11% to 34%) reduction in the time to substantial employment in two of the three state samples. The positive influence of subsidy use on transitions to substantial employment is strongest for those welfare applicants with the lowest earnings who are mixing welfare and work prior to subsidy receipt.     

Child care quality in different state policy contexts

Using data from the Child Care Supplement to the Fragile Families and Child Wellbeing Study, we test associations between the quality of child care and state child care policies. These data, which include observations of child care and interviews with care providers and mothers for 777 children across 14 states, allow for comparisons across a broader range of policy regimes and care settings than earlier research on this topic. Using multilevel linear and logistic models, we found that more generous subsidy policies (that is, greater investment, higher income eligibility) were positively associated with the quality of care in nonprofit child care centers, as well as with the use of center care. The stringency of regulations (that is, teacher education requirements, teacher‐child ratios/thresholds) was also associated with both quality and type of care, but in more complex ways. Higher teacher training requirements were positively associated with the quality of both family child care and nonprofit centers, while more stringent regulations decreased the number of children attending center care. No links were found between state policies and the quality of for‐profit center care. The implications for policy makers, advocates, and policy analysts are discussed. © 2007 by the Association for Public Policy Analysis and Management     

Subsidized housing,housing prices,and the living arrangements of unmarried mothers

Abstract

Although many studies estimate the effects of welfare benefits on mothers’ living arrangements, housing subsidies and prices are rarely the focus. This article uses a new longitudinal birth cohort study, the Fragile Families and Child Wellbeing Study, to examine the relationship between subsidized housing, housing prices, and the living arrangements of unmarried mothers three years after a nonmarital birth.

Results suggest that the availability of subsidized housing is negatively associated with marriage relative to living alone. Eligibility criteria and means testing in subsidized housing may make marriage a costly choice. Housing prices are positively associated with marriage, cohabitation, and living with family members relative to living alone. Economies of scale may be particularly important for single‐earner households when housing prices increase. Failure to control for housing costs and subsidies leads to underestimates of the effects of welfare and unemployment rates on the living arrangements of unmarried mothers.     

Preserving Neighborhood Opportunity: Where Federal Housing Subsidies Expire

Abstract

Rent burdens are increasing in U.S. metropolitan areas while subsidies on privately owned, publicly subsidized rental units are expiring. As a result, some of the few remaining affordable units in opportunity neighborhoods are at risk of being converted to market rate. Policy makers face a decision about whether to devote their efforts and scarce resources toward developing new affordable housing, recapitalizing existing subsidized housing, and/or preserving properties with expiring subsidies. There are several reasons to preserve these subsidies, one being that properties may be located in neighborhoods with greater opportunity. In this article, we use several sources of data at the census tract level to learn how subsidy expirations affect neighborhood opportunity for low-income households. Our analysis presents several key findings. First, we find that units that left the project-based Section 8 program were – on average – in lower opportunity neighborhoods, but these neighborhoods were improving. In addition, properties due to expiry from the Section 8 program between 2011 and 2020 are in higher opportunity neighborhoods than any other subsidy program. On the contrary, new Low-Income Housing Tax Credit (LIHTC) units were developed in tracts similar to those where LIHTC units are currently active, which tend to be lower opportunity neighborhoods.     

Central-Local Government Relations in Transition: The Case of Swedish Child Care

The provision of subsidized child care has grown to become asizeable economic activity in Sweden during recent decades.This paper examines the changed financial relation betweencentral and local governments and the impact of child-caregrants on local government behaviour. We find that during anearlier regime, with a system of matching grants, localgovernments responded strongly to the incentives of the rules.This resulted in both intended and unintended outcomes, aswell as a distortion of information to the central government.Experiences from a recent transition of regime towards a kindof closed block grant system, illustrates new types ofadaptive behaviour but also the problem of finding a formulafor a fair allocation of resources among local governments.When designing a block grant system a distinction must be madebetween expenditures and resource needs; cost expenditure datado not necessarily reflect resource needs in cases where thereare national categorical equity goals related to socialservices of a merit-want character.     

Inefficient households and the mix of government spending

A model is presented in which individuals can vote over government subsidies to a private good and over redistributive taxation. The subsidized good is purchased and shared by couples who act noncooperatively, while possibly being altruistic towards each other. The framework allows a separation of the subsidy policy from redistributive policy. In a majority voting equilibrium the subsidy is used exclusively to correct the individuals' spending pattern. The results suggest that spending on private goods should be an important item in government expenditures when there is strong positive income bias in the political process and/or when household decisions are relatively inefficient.     

The effects of an employer subsidy on employment outcomes: A study of the work opportunity and welfare‐to‐work tax credits

Employer subsidies such as the Work Opportunity Tax Credit (WOTC) and the Welfare‐to‐Work Tax Credit (WtW) are designed to encourage employment by partially reimbursing employers for wages paid to certain welfare recipients and other disadvantaged workers. In this paper, I examine the effects of these subsidies on employment, wages, and job tenure using unique administrative data from Wisconsin. My ability to precisely identify the subsidy‐certified workers allows me to distinguish the effects of program participation from mere eligibility. Using propensity score matching estimation, I find some evidence of short‐term improvements in labor market outcomes, but little evidence of sustained benefits. © 2008 by the Association for Public Policy Analysis and Management.     

Are Parental Welfare Work Requirements Good for Disadvantaged Children? Evidence From Age‐of‐Youngest‐Child Exemptions

This paper assesses the impact of welfare reform's parental work requirements on low‐income children's cognitive and social‐emotional development. The identification strategy exploits an important feature of the work requirement rules—namely, age‐of‐youngest‐child exemptions—as a source of quasi‐experimental variation in first‐year maternal employment. The 1996 welfare reform law empowered states to exempt adult recipients from the work requirements until the youngest child reaches a certain age. This led to substantial variation in the amount of time that mothers can remain home with a newborn child. I use this variation to estimate the impact of work‐requirement‐induced increases in maternal employment. Using a sample of infants from the Birth cohort of the Early Childhood Longitudinal Study, the reduced form and instrumental variables estimates reveal sizable negative effects of maternal employment. An auxiliary analysis of mechanisms finds that working mothers experience an increase in depressive symptoms, and are less likely to breastfeed and read to their children. In addition, such children are exposed to nonparental child care arrangements at a younger age, and they spend more time in these settings throughout the first year of life.     

Does Family‐Friendly Policy Matter? Testing Its Impact on Turnover and Performance

This study investigates the relative effects of four types of family‐friendly policies—child care subsidies, paid leave for family care, telework, and alternative work schedules—on turnover rates and effectiveness in federal agencies. Contemporary social exchange theory predicts that an agency’s average level of satisfaction with a specific family‐friendly policy is negatively associated with turnover in the agency but positively associated with overall performance. This analysis differs from common expectations. Only child care subsidies show a positive, significant influence on reducing turnover. Child care subsidies and alternative work schedules reflect positive and significant influences on agency effectiveness. Ironically, an agency’s average satisfaction with telework arrangements proves to be a significant but negative effect on performance.     

Can child care assistance in welfare and employment programs support the employment of low‐income families?

Policymakers have long recognized child care as a key ingredient in low‐income parents' employability. We examine the effects of expansions in child care policies that were bundled with a mix of employment‐related policies and implemented as part of several random assignment studies on families' child care access and cost. Almost all of these welfare and employment programs increased employment and led to concomitant increases in the use of child care, especially paid child care. Only the programs that also expanded access or affordability of child care consistently increased the use of child care subsidies and reduced out‐of‐pocket costs to parents, allowing parents to purchase center‐based care. With one exception, such programs had small effects on employment‐related child care problems, suggesting that broader and more generous targeting of child care assistance may be important for achieving the goal of enhancing the stability of employment among low‐income families. © 2004 by the Association for Public Policy Analysis and Management.     

Child Support and the Affordable Care Act's Medicaid Expansions

A quickly developing literature has shown that the Affordable Care Act's (ACA) Medicaid expansions have improved health insurance coverage, health, and financial well‐being among low‐income adults without dependent children. This population includes noncustodial parents. With substantial overlap in the population that is typically obligated to pay child support and the population that has strongly benefited from the expansions, there may be potential implications for child support enforcement. In this paper, I examine the effect of public health insurance eligibility to low‐income adults on child support outcomes. I find that the ACA Medicaid expansions increased child support distributed to custodial families as arrears by 8.5 percent. Evidence also suggests current support distributions increased by about 2 percent. There were no significant effects on paying toward a child support order. Among unmarried mothers, the likelihood of child support receipt increased by 8 percent. These results imply that access to public health insurance can increase the ability of noncustodial parents to pay child support.     

What Interventions Work Best for Families Who Experience Homelessness? Impact Estimates from the Family Options Study

What housing and service interventions work best to reduce homelessness for families in the United States? The Family Options Study randomly assigned 2,282 families recruited in homeless shelters across 12 sites to priority access to one of three active interventions or to usual care in their communities. The interventions were long‐term rent subsidies, short‐term rent subsidies, and transitional housing in supervised programs with intensive psychosocial services. In two waves of follow‐up data collected 20 and 37 months later, priority access to long‐term rent subsidies reduced homelessness and food insecurity and improved other aspects of adult and child well‐being relative to usual care, at a cost 9 percent higher. The other interventions had little effect. The study provides support for the view that homelessness for most families is an economic problem that long‐term rent subsidies resolve and does not support the view that families must address psychosocial problems to succeed in housing. It has implications for focusing government resources on this important social problem.     

Federal Intervention in the Municipal Bond Market: The Effectiveness of the Build America Bond Program and Its Implications on Federal and Subnational Budgeting

The American Recovery and Reinvestment Act of 2009 (ARRA) included several new federal programs intended ostensibly to “unfreeze” the credit markets as a result of the global financial crisis. One such program, the Build America Bond (BAB) program, aimed to lower the borrowing costs for state and local governments by increasing their access to capital and providing a more generous federal subsidy than the traditional indirect tax exemption subsidy. BABs are taxable bonds sold by subnational governments, which carry a 35 percent direct federal payment subsidy to the borrower. In creating this program, the federal government hoped that the large direct federal subsidy along with greater potential investor interest in taxable securities would result in lower borrowing costs for state and local governments vis‐à‐vis traditional tax‐exempt bonds. This research study examines the relative effectiveness of the BAB program and details the various quantitative and qualitative implications on federal and subnational budgeting by moving from an indirect to a direct federal subsidy approach in facilitating state and local government capital raising.     

Direct Versus Indirect Federal Bond Subsidies: New Evidence on Cost of Capital

The longstanding debate surrounding the most effective way for the U.S. federal government to subsidize state and local government capital‐raising received renewed attention in recent years due to the passage and subsequent expiration of the taxable Build America Bond (BAB) program. Recent academic studies, as well as reports from the U.S. Treasury Department, claim that the direct subsidy approach as evidenced by the BAB program provides greater bond borrowing cost benefits to state and local governments compared to traditional tax‐exempt bonds. This research investigates the extent to which such borrowing cost benefits may be overstated since it appears previous studies did not adequately account for the early call optionality of tax‐exempt bonds.     

Hitting a moving target: income-related health insurance subsidies for the uninsured.

New government health insurance programs are likely to emphasize voluntary purchases in a market setting, with subsidies targeted at low-income populations and stress on managed care. Such programs are best structured with a guaranteed enrollment period that is as long as six months to a year. However, given that incomes change over time, errors will be made in awarding income-related subsidies for that long. These errors are assessed in simulations undertaken with longitudinal data from the Survey of Income and Program Participation. Two allocations of the subsidies, based on current income at the beginning of the enrollment period and on actual income assessed at the end, are compared for a variety of program designs. Prospective determination of subsidies is somewhat biased toward overpayment. Net overpayments amount to 5-10 percent of subsidy costs. However, prospective payment encourages participation in the subsidy program. The simulated participation rate for true eligibles is as high as 73 percent with prospective subsidies, compared to 69 percent with retrospective reconciliation. Net overpayments are slightly reduced by testing income less frequently and over longer periods.     

Financial support of children involved in special needs adoption: A policy evaluation

This article represents one of the first systematic analyses of state subsidy payments to families adopting children with special needs (children with physical and/or mental disabilities and children who are classified as hard-to-place). The analysis focuses on the monetary subsidies provided to adoptive parents of special needs children. It attempts to characterize variation in subsidy levels between counties and the impact of subsidy levels on a child's length of time until adoptive placement. The data set employed in the analysis was collected from primary sources and is one ofthe first available depositories of information on subsidy payments for special needs adoption. Results indicate that child and case characteristics explain a significant proportion of the variation in state adoption subsidy levels, but that a substantial proportion of between-county variation in subsidy levels remains unexplained. Subsidy level was not found to affect the adoption placement rate at the margin, except for children with mental disabilities. The policy implications of these results are discussed.     

Public Subsidies for Private Schooling: A Comparative Analysis of Argentina and Chile

Argentina and Chile have long-standing policies that award public subsidies to private schools. This article compares the academic outcomes of seventh- and eighth-graders in public and private schools in each country. Three types of private schools are analyzed: Catholic schools that are subsidized by the government, nonreligious schools that are subsidized, and private schools that receive no subsidies. Ultimately, the analyses suggest a mixed portrait of private school effectiveness, in which Catholic schools have the most consistent links to achievement. Nonreligious subsidized schools in Chile, often operated by for-profit corporations, produce outcomes no different from public schools.     

Incentives,challenges, and dilemmas of TANF: A case study

This paper compares the incentives inherent in TANF (Temporary Assistance for Needy Families), the U.S. welfare system in place after the 1996 reforms, with those of TANF's predecessor, AFDC (Aid to Families with Dependent Children), using the experience in one state, Wisconsin, as an example. Is the new program successful in avoiding the “poverty trap” of the old welfare system, in which the marginal tax rates imposed on earnings and benefits were so high that they discouraged work effort outside a narrow earnings range? As women receiving assistance begin working more hours and earning more, income‐conditioned benefits (Food Stamps, EITC, Medicaid, and subsidies for child care) are reduced and withdrawn, in effect constituting a “tax” on earnings. Under TANF, there is more support for these families, at least in Wisconsin, and so economic well‐being should be higher for most women with earning in this range than it was under AFDC. But marginal tax rates under TANF remain high, and in some income ranges they are higher than under AFDC. Once in the work force, former TANF recipients have earnings over the long run that expose them to very high marginal tax rates, which decrease the benefits of working harder and make it very difficult to gain full eonomic independence. Evidence from other sources suggest that most low‐skilled women have earnings in the same range and so are likely to face similar reductions in benefits such as child care subsidies or the EITC as their earnings increase, even if they are not receiving welfare‐related benefits. © 2002 by the Association for Public Policy Analysis and Management.