The Effects of Increasing Income for Vulnerable Families: Better Birth Outcomes, Bigger Disparities

Evidence suggests that cash transfers through the Earned Income Tax Credit (EITC) program lead to higher birth weight and lower probability of low birth weight, outcomes that are important predictors of future health, education, and earnings outcomes. These outcomes are consistent across federal, state and county-level EITC programs. We use data from a county-level program to estimate whether these effects are consistent across race and ethnicity groups. Using a county-level policy circumvents problems associated with differences across states in policies and programs affecting the same population and is suitable for assessing the robustness of results using within county and across county differences. Assessing possible differences by race and ethnicity provides key information on the potential for using the EITC, and transfer payments more generally, to address disparities in birth outcomes. We use US Vital Statistics data covering births in Maryland from 1995-2004 in a differences-in-differences (DD) and a difference-in-differences-in-differences (DDD) framework. Using DD and DDD strategies, we find that the Montgomery County EITC increased infant birth weight by 25-32 grams and decreased the probability of low birth weight by 1.8-2 percentage points among likely eligible mothers. These estimates suggest that the local credit has an additional impact on birth outcomes of similar magnitude to state EITC programs. These effects are largely driven by effects for white mothers suggesting that these income transfers might provide some explanation for why birth outcomes are improving over time, but the black-white gap in birth outcomes is growing.