The Impact of Cash and Near-Cash Benefits on School Readiness: Evidence from SNAP and EITC

Background.

Research has increasingly shown that tax and transfer programs, e.g., Supplemental Nutrition Assistance Program (SNAP) and the Earned Income Tax Credit (EITC), can benefit children’s future. However, existing research on SNAP and EITC is limited in many ways. To my knowledge, there has been no study done on whether SNAP and EITC serve as complements, substitutes, or neither in their effects on children’s development, despite the evidence that for SNAP families, the most common receipt among the major cash/near-cash safety net programs is of EITC benefits (Moffitt, 2020). Furthermore, evidence on the individual effect of EITC and SNAP on child development is limited and somewhat mixed in that there is a lack of research on how they affect children’s cognitive and socioemotional development and findings on their effects on children’s health are mixed.

Hence, this study contributes to these research gaps by examining 1) What are the effects of greater EITC and SNAP benefits, respectively, on children’s school-readiness in cognitive (i.e., early reading and math), socio-emotional (i.e., approaches to learning, interpersonal skills, and externalizing behavior) and health domains (i.e., whether a parent reported their child has an excellent/very good health status)?; and 2) Do greater SNAP and EITC benefits interact to affect those school-readiness outcomes?

Methods.

Data comes from the Early Childhood Longitudinal Study – Birth Cohort. To address endogeneity of actual program benefit amount, this study leverages variations across time and place in the purchasing power (i.e., real value) of SNAP benefits and in state EITC benefits. The SNAP benefit formula in a given year is constant across the contiguous U.S. even though there are significant variations in the local cost of living. Thus, following Bronchetti, Christensen, and Hoynes (2019), I compare the maximum SNAP benefit to the regional cost estimate of the Thrifty Food Plan to create the real value of SNAP benefit measure, which varies by 35 “market groups” and year. As the EITC generosity measure, I use the adoption of state refundable EITC and the maximum state + federal EITC benefits, which vary by state and year, and state, year, and the number of children, respectively. As its empirical strategy, this paper uses a child fixed effects approach.

Results.

Among the high intent to treat sample (i.e., parents without a college degree), I find that more generous EITC benefits and real value of SNAP benefits, respectively, lead to improvements in children’s cognitive and socioemotional development, but not on children’s health. In addition, this study finds that particularly among more disadvantaged families (i.e., parents who have a high school degree or below education), EITC and SNAP benefits serve as complements for children’s cognitive and health outcomes. I find suggestive evidence that EITC and SNAP benefits are complements for socioemotional development.

Implications.

Taken together, this study provides important policy implications that more generous EITC and SNAP benefits – even more so when they are combined – can improve school-readiness, which has been associated with various measures of student success at school (Gregory et al., 2021).