Bridging Disciplinary Boundaries (January 11 - 14, 2007)

Purpose: Recent research has raised issues as to how family economic hardships affect children's development and outcomes. However, there has been relatively little research that links family economic status with children's development and outcomes in understanding the pathways that mediate the association between family economic status and child well-being. The purpose of this study is to examine how parental investment and family functioning mediates the effect of family economic status on children's development and outcomes.

Literature Review: There are two main perspectives in the literature to explain how family economic status matters for children's development and outcomes. The first perspective emphasizes that children in families with lower income are likely to fare worse because they may have limited access to resources which may be necessary for their development. The second perspective stresses that economic hardships may affect parents' psychological well-being adversely, and psychological distress, in turn, leads to less supportive parenting practices, which eventually had a negative effect on children's outcomes. This study focused on both investment mediators and family functioning mediators in order to examine the pathways.

Methods: The study used the 1983-2002 annual data from the Panel Study of Income Dynamics (PSID) and data from the 2002 Child Development Supplement to the PSID. A propensity score matching method was employed to make welfare recipients and non welfare recipients similar in their demographic backgrounds. The sample comprised 710 children who resided in 412 families. Structural equation models were tested to combine complex path models with latent variables such as parental investment and family functioning. Family economic status was measured by family income, welfare recipiency and parents' work status. Investment factor included childcare arrangement, after school activities, expenditures and savings for child. Family functioning factor included family conflict, sibling relationships, and psychological distress. Woodcock-Johnson (W-J) Achievement Test scores, Behavior Problem Index (BPI), and Audio-Computer Assisted Self-Interview (ACASI) components (e.g. deviant behaviors, alcohol and drug use) were examined to measure children's development and outcomes.

Results: Mediating mechanisms of both investments and family functioning distinctly operated on the association between family economic status and children's development and outcomes. Parental investment obviously mediated between family economic status and children's W-J scores, whereas the effect of family economic status on children's BPI scores was strongly mediated by family functioning. The mediating effects of two factors on ACASI components were statistically significant, but relatively weak. For low income families, the mediating factors as well as the family economic status more significantly affected children's development and outcomes, compared to high income families.

Implications: From the study, it is clear that there are various pathways through which family economic status operates on child outcomes. To promote children's healthy development and better outcomes, an integrated approach is needed. It might be most effective to offer a package of services to families that includes not only cash assistance and earnings supplements, but also in-kind services such as home visiting programs that are aimed at reducing parental stress and improving parenting behavior, and high quality center-based child care.