The long-term effect of childhood poverty

Abstract

This paper uses variation among siblings to identify the consequences of childhood poverty on both labour and marriage market outcomes. In the labour market, individuals who experienced childhood poverty are found to have lower earnings and lower labour market attachment and to have worse jobs both vertically in terms of low-paying industries and horizontally in terms of job positions. In the marriage market, childhood poverty is found to have negative consequences for the probability of marriage, cohabitation, and having children around the age of 30. The effect sizes are found to exhibit an inverse u-shape in the age of the child, peaking during adolescence. Results on educational choices suggest that the mechanisms behind these results can be that childhood poverty affects the skill formation, networks, and decision making of the child.

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Notes

  1. 1.

    see http://www.oecd.org/social/income-distribution-database.htm

  2. 2.

    Using age cut-offs at 14, 18, or 25 yields similar results.

  3. 3.

    Table 9 in Appendix shows the number of observations excluded from the sample in each selection step.

  4. 4.

    Section 5 shows results where other poverty measures are used.

  5. 5.

    In the sample, it is found that the sibling income correlation is 0.43, which is in line with the literature (Solon 1999; Black and Devereux 2010).

  6. 6.

    The outcome years are treated as separate cross-sections by allowing for separate fixed effects for each outcome year. This assumption is preferred since it is less restrictive than the alternative of pooling the cross-sections and taking out only one family fixed effect. However, estimations that do not allow for year variation in the fixed effects deliver similar results.

  7. 7.

    Cut-offs at ages 14, 18, and 25 were implemented with similar results.

  8. 8.

    Table 9 in Appendix shows the identifying variation in the data. That is the number of sibling pairs with variation in accumulated childhood poverty within each age interval. The precision is increased by using 4 years of outcomes from 2008 to 2011.

  9. 9.

    One might be concerned that the older siblings experienced substantially more childhood poverty than younger siblings. This is only the case for 55% of the sibling pairs. It thus raises no concern. Estimations where the control group is split into two by the birth order can be found in Section 5.2.

  10. 10.

    An individual is defined as being poor if the disposable income of the individual is below 50% of the median income of the full population of Danes ages 18 to 55 in a given year. An individual is defined as being rich if the disposable income of the individual is above 150% of the median income of the full population of Danes ages 18 to 55 in a given year. The results can also be found in Table 10 in Appendix.

  11. 11.

    Age 22 is chosen as it is the first age childhood poverty is no longer measured. Other early cut-offs yield similar results. A high-end job is defined using information on the job description and includes high-end white-collar workers and blue-collar workers with large salaries. The results can also be found in Tables 1113 in Appendix.

  12. 12.

    The results can also be found in Table 12 in Appendix.

  13. 13.

    The results can also be found in Tables 11 and 13 in Appendix.

  14. 14.

    Levy and Duncan (2000) and Løken et al. (2012) also find that parental income can affect the duration of schooling of the child.

  15. 15.

    A similar result is found for high school enrolment. The estimates are available upon request.

  16. 16.

    Outside the labour market is defined as non-employed and not receiving UI-benefits.

  17. 17.

    See Aaronson (1998), Case and Katz (1991), Galster et al. (2008), and Galster (2012).

  18. 18.

    Clearly, most of the variation in the data across municipalities is captured by the family fixed effects. Thus, this result is in itself perhaps less surprising.

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Acknowledgements

The author would like to thank the anonymous referees for helpful comments and suggestions. I express my thanks for useful comments on this paper and earlier drafts to Erdal Tekin, Rune Vejlin, participants in the European Economic Association Annual Congress 2015, and participants in the 8th Nordic Econometric Meeting. The usual disclaimer applies.

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Correspondence to Rune V. Lesner.

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Appendix

Appendix

Table 9 Sample selection
Fig. 8
figure8

Percent of children experiencing childhood poverty in a given year by age of the child. Mean and 95% confidence intervals are presented in the figure

Fig. 9
figure9

Number of sibling pairs and the percent of all sibling pairs in the sample where the number of years in childhood poverty within a given age interval varies between the siblings

Table 10 The effect of childhood poverty by the age of the child on a series of adult outcomes. Part 1
Table 11 The effect of childhood poverty by the age of the child on a series of adult outcomes. Part 2
Table 12 The effect of childhood poverty by the age of the child on a series of adult outcomes. Part 3
Table 13 The effect of childhood poverty by the age of the child on a series of adult outcomes. Part 4
Table 14 The impact of the father being outside the labour market on the effect of childhood poverty on the disposable income by the age of the child
Table 15 The effect of childhood poverty using measures of persistent poverty

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Lesner, R.V. The long-term effect of childhood poverty. J Popul Econ 31, 969–1004 (2018). https://doi.org/10.1007/s00148-017-0674-8

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Keywords

  • Poverty
  • Child development
  • Family background
  • Siblings
  • Intergenerational mobility

JEL Classification

  • D31
  • I32
  • J13