Net Worth Poverty and Children's Development

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1 Project Summary (limit 30 lines) 2 In the United States, economic precarity for children has been narrowly defined in terms of 3 income poverty (IP), which overlooks the large share of children who are at risk because their 4 families are net worth poor. Net worth poverty (NWP) refers to households whose net worth 5 (assets less debts) is less than one-fourth of the federal poverty. NWP is pervasive among 6 households with children (child households), as 35% of child households were net worth poor in 7 2019, with higher fractions of NWP among African American (57%) and Hispanic (50%) child 8 households. Three-fourths of child households who are net worth poor are not income poor and 9 the associations between NWP and child developmental outcomes are unlikely to be 10 attributable to IP. We propose that a narrow focus on IP ignores the potential risk faced by 11 children who are net worth poor, overlooks how NWP contributes to racial and ethnic gaps in 12 child well-being, and that policies that are income-centric will be limited in their effectiveness if 13 they do not also address NWP. This innovative research seeks to: 1) identify if NWP is 14 associated with children's cognitive and behavioral outcomes, and if NWP operates 15 independently of IP; 2) investigate how racial and ethnic disparities in NWP are associated with 16 racial and ethnic disparities in children's cognitive and behavioral outcomes; and 3) examine 17 how the Earned Income Tax Credit (EITC) alleviates NWP and its attendant negative 18 consequences on child well-being. Data come from the 1994-2019 Panel Study of Income 19 Dynamics (PSID) and its Child Development Survey (CDSS). In addition to growth curve 20 models, the project employs two-stage least squares to produce quasi-experimental estimates 21 of the effect of EITC on NWP and child outcomes and Agent Based Models (ABMs), a 22 simulation modeling approach to explore “what if” scenarios. Models will be conducted 23 separately by child age to investigate if associations vary by developmental stage. This project 24 advances knowledge by analyzing the unique risks posed by wealth deprivation and evaluating 25 their consequences for the well-being of African American and Hispanic children. Our work also 26 lays the foundation for a randomized control trial that would test the NWP-reducing effects of 27 cash and asset transfers. In sum, we contribute social and policy knowledge to an overlooked 28 component of economic deprivation, delineate the potential consequence of wealth deprivation 29 for racial and ethnic gaps in child well-being and inform ongoing policy efforts as to how 30 economic-resource centered policies and practices can enhance the well-being of children.