Sunday, 16 January 2005 - 10:15 AM

This presentation is part of: Family Impacts of Poverty

Measuring The Impact Of Household Wealth On Child Development Outcomes

Purpose: There have been a range of studies demonstrating the impact of income poverty on child development outcomes (Aber, Bennett, Conley, & Li, 1997; Duncan & Brooks-Gunn, 1997; Duncan, Yeung, Brooks-Gunn, & Smith, 1998; Guo & Harris, 2000). Only a few recent studies (Conley, 1999; Shapiro, 2004) have considered the impact of wealth and financial assets on child outcomes. Given that the correlations between income and wealth are quite low (around .32) and that wealth disparities across race are shockingly high (by a factor of 10 or greater), it is useful to consider whether household wealth is distinct from income with respect to child outcomes.

Methods: Using data from the Panel Study of Income Dynamics (PSID) Child Development Supplement, hierarchical regressions are conducted to test how household wealth in 1994 impacts two cognitive test scores and child behavior in 1997. The regressions are run across four models. The first model controls for the child-level characteristics, the second model controls for parental characteristics, the third model controls for permanent income, and then various wealth and asset variables are added in the fourth model. These are included in a stepwise fashion to test whether wealth measures contribute additional information to or perhaps cancel out income-related effects. The wealth measures are added at the very end after the other controls to make this a conservative test of an independent wealth effect.

Results: For two of the three dependent variables in this study wealth is a statistically significant predictor of child well-being outcomes, even after controlling for other commonly used socio-economic status indicators. In all three regression models including a block of wealth measures improved R2 by at least a percentage point. There are also interesting differences across race.

Implications: These findings suggest that including measures of wealth in studies of child development and well-being might contribute unique information. Considering only income and educational attainment may lead to the erroneous conclusion that households (particularly African American ones) are well off economically when in actuality hiding relevant wealth disparities.

Literature Cited:

Aber, J. L., Bennett, N. G., Conley, D. C., & Li, J. L. (1997). The effects of poverty on child health and development. Annual Review of Public Health, 18, 463-483.

Conley, D. (1999). Being Black, Living in the Red: Race, Wealth, and Social Policy in America. Berkeley, CA: University of California Press.

Duncan, G. J., & Brooks-Gunn, J. (1997). Consequences of growing up poor. New York: Russell Sage Foundation.

Duncan, G. J., Yeung, W. J., Brooks-Gunn, J., & Smith, J. R. (1998). How much does childhood poverty affect the life chances of children? American Sociological Review, 63(3), 406-423.

Guo, G., & Harris, K. M. (2000). The mechanisms mediating the effects of poverty on children's intellectual development. Demography, 37(4), 431-447.

Shapiro, T. M. (2004). The Hidden Cost of Being African American: How Wealth Perpetuates Inequality. New York: Oxford University Press.

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