Working Paper: NBER ID: w29854
Authors: Irwin Garfinkel; Laurel Sariscsany; Elizabeth Ananat; Sophie M. Collyer; Robert Paul Hartley; Buyi Wang; Christopher Wimer
Abstract: We conduct a benefit-cost analysis of a U.S. child allowance, based on a systematic literature review of the highest quality available causal evidence on the short- and long-term effects of cash and near-cash transfers. In contrast to the previous studies we synthesize, which tend to measure a subset of benefits and costs available in a particular dataset, we establish a comprehensive accounting of potential effects and secure estimates of each. We produce core estimates of the benefits and costs per child and per adult of increasing household income by $1,000 in one year; these can be applied to value any cash or near-cash program that increases household income. Using microsimulation, we then apply these estimates to determine net aggregate benefits of three child allowance policies, including the expanded Child Tax Credit as enacted for the year 2021 in the American Rescue Plan (ARP). Our estimates indicate that making that expansion permanent would cost $97 billion per year and generate social benefits with net present value of $982 billion per year. Sensitivity analyses indicate that our estimates are robust to alternative assumptions and that all three child allowance policies we evaluate produce very high net returns for the U.S. population.
Keywords: No keywords provided
JEL Codes: H2; H23; I38; J18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increasing household income by $1,000 per year (D19) | Enhanced future earnings (J17) |
| Increasing household income by $1,000 per year (D19) | Improved educational attainment (I24) |
| Increasing household income by $1,000 per year (D19) | Better health outcomes (I14) |
| Enhanced future earnings (J17) | Higher tax payments (H29) |
| Improved child outcomes (I24) | Reductions in public expenditures on health care (H51) |
| Improved child outcomes (I24) | Reductions in public expenditures on criminal justice (H76) |
| Improved child outcomes (I24) | Reductions in public expenditures on foster care (H53) |
| Child allowances (J13) | Societal benefits outweigh costs (H43) |