Childhood Income Volatility and Adult Outcomes

Abstract

Using data linked across generations in the Panel Study of Income Dynamics, I estimate the relationship between exposure to volatile income during childhood and a set of socioeconomic outcomes in adulthood. The empirical framework is an augmented intergenerational income mobility model that includes controls for income volatility. I measure income volatility at the family level in two ways: (1) instability as measured by squared deviations around a family-specific mean; and (2) instability as percentage changes of 25 % or more. Volatility enters the model both separately and interacted with income level. I find that family income volatility during childhood has a modest negative association with educational attainment. Volatility has a smaller descriptive role in explaining intergenerational outcomes relative to permanent income. Across the income distribution, the negative association between volatility exposure and educational attainment is largest for young adults from moderate-income families.

The Changing Safety Net for Low-Income Parents and Their Children: Structural or Cyclical Changes in Income Support Policy?

“…For women, SNAP has been linked to an increase in economic self-sufficiency (Almond et al 2011; Hoynes et al 2015). And finally, higher income during childhood for low-income families has been associated with a range of positive socioeconomic and behavioral outcomes (Akee et al 2015; Duncan et al 2011, 2014; Hardy 2014; Cooper and Stewart 2013). …”

Association between income trajectories in childhood and psychiatric disorder: a Swedish population-based study

“…Until now, only a few studies have examined variation in childhood family income and its association with health and social outcomes 10–12. These studies have found unfavourable relationships between childhood family income instability and children's educational attainment,10 11 development12 and behavioural problems 12. These studies have mostly focused on income fluctuation in general, but have also suggested that income fluctuations may be particularly harmful among low-income families.…”

Income Level and Volatility by Children's Race and Hispanic Ethnicity

“…Three recent studies demonstrated negative associations between income volatility and both adolescent and adult school outcomes (Gennetian et al, , ; Hardy, ). Two of these studies (Gennetian et al, ; Hardy, ) used nationally representative data and showed that the adverse effects are larger for lower income and non‐White adolescents.…”

“…Economic disadvantage is highly stratified by race and ethnicity in the United States, with Hispanic and non‐Hispanic Black families facing higher poverty rates, lower average income and wealth, and higher rates of material hardship than non‐Hispanic White families (McKernan, Ratcliffe, Steuerle, & Zhang, ; Neckerman, Garfinkel, Teitler, Waldfogel, & Wimer, ; Semega, Fontenot, & Kollar, ). Recently, research in economics and sociology has drawn attention to income volatility as a distinct form of economic disadvantage with implications for child and adult well‐being (Gennetian, Rodrigues, Hill, & Morris, ; Gennetian, Wolf, Hill, & Morris, ; Hardy, ; Western, Bloome, Sosnaud, & Tach, , ), but we know little about how income volatility differs by race and ethnicity.…”

“…This trend is consistent with the increasing instability of work, family structure, and public assistance for less‐educated adults during the same period (Cherlin, ; Farber, ; Hardy, ; Kalleberg, , ; Lambert, Fugiel, & Henly, ; Manning, Smock, & Majumdar, ). The causes of income changes and the fluctuations in resources have been shown to affect material hardship and adult and child outcomes (Gennetian et al, ; Hardy, ; Leete & Bania, ; Sandstrom & Huerta, ). Although the mechanisms of these effects have not been identified conclusively, theory would suggest that income volatility could affect consumption, stress, parenting, and the regularity of family routines (Anderson, Butcher, Hoynes, & Schanzenbach, ; H. D. Hill, Morris, Gennetian, Wolf, & Tubbs, ).…”