Long-run Impacts of Early Childhood Poverty: Comparative Evidence from Norwegian Registry Data and the U.S.

PSID

Greg J. Duncan University of California-Irvine and Northwestern University Kjetil Telle Statistics Norway Kathleen M. Ziol-Guest Institute for Children and Poverty Ariel Kalil University of Chicago March 10, 2009

Paper prepared for presentation at the Conference The long-run impact of early life events II at the National Poverty Center, University of Michigan, March 12-13 2009.

Long-run Impacts of Early Childhood Poverty: Comparative Evidence from Norwegian Registry Data and the U.S. PSID

Abstract Our paper assesses the consequences of childhood poverty between a childs prenatal year and fifteenth birthday for a host of adult achievement outcomes, measured as late as age 37. Using data from the Panel Study of Income Dynamics and Norwegian Registry we estimate the relationship between household economic conditions in early childhood, middle childhood and adolescence, controlling for demographic conditions at the time of the birth, and adult earnings, work hours, and years of completed schooling. In the case of the PSID, we find statistically significant and, in some cases, large detrimental effects of early childhood poverty on earnings and work hours. For the Norwegian data, correlations between childhood income and these adult outcomes are generally weaker, although, as with the PSID, increments to low income appear to matter much more than increments to higher income. At best, early income has a marginally greater impact on these outcomes than income later in childhood in the Norwegian data. Preliminary estimates from sibling fixed effects models yield ambiguous results.

Long-run Impacts of Early Childhood Poverty: Comparative Evidence from Norwegian Registry Data and the U.S. PSID

Family influences early in life play an important role in childrens development. It is well documented in studies from Europe and the United States that family environments of young children are important predictors of cognitive and behavioral skills, as well as of outcomes later in life, such as education, labor market participation, earnings, health, and crime (d'Addio 2007). In particular, the literature shows that children of families with low income and education have substantially lower prospects for success in life than other children. Norway is no exception, despite the fact that intergenerational earnings correlations are lower in Scandinavia than in Anglo-Saxon Europe and the US (Bjorklund & Jantti, 2000; nevertheless, such correlations are substantially higher at the lower end of the earnings distribution [Bratberg, Nilsen, & Vaage, 2007]). In Norway, there is a large ability gap between children of advantaged and disadvantaged families. A recent study shows that, by age three, children of parents with university education have substantially better language development than other children (Schjlberg et al. 2008). And, in Norwegian public schools there are large differences in grades between children of parents with high and low education (Hgeland et al. 2006). This gap in skill development persists into adolescence and adulthood. Children of parents with low income are more likely to become low income earners as adults (Bratberg et al. 2008); and children of social assistance claimants are more likely to claim social assistance as adults (Lorentzen & Nilsen 2008). Finally, low childhood socioeconomic position is associated with increased mortality for most causes of death during young adulthood (ages 25-35) among Norwegians (Strand & Kunst, 2007).

The early childhood period is especially sensitive to environmental influences. Low income and its attendant stressors therefore have the potential to shape the neurobiology of the developing child in powerful ways, which may lead directly to poorer outcomes later in life (see Holzer, Schanzenbach, Duncan, & Ludwig, 2007; for a review). Poverty in early childhood can also affect adult attainment, behavior, and health indirectly through parents material and emotional investments in childrens learning and development. Despite the many correlations obtained in descriptive research on this topic, it is far from clear to what extent poverty itself is the cause of these differences. Our goal in this paper is to obtain relatively unbiased estimates of the total-effects association between early childhood poverty and adult attainment, behavior, and health. We extend the U.S.-focused work of Duncan and colleagues (e.g., Duncan, Brooks-Gunn, Yeung, & Smith, 1998; Duncan, Ziol-Guest, & Kalil, 2009), by using individual level data for the whole resident Norwegian population available every year back to the late 1960s. These data allow us to examine the long-run impacts of low income early in life, net of income later in childhood and other correlated family factors surrounding a childs birth. The richness of the data allow us to consider a wide range of outcomes measured far into the childs adulthood, including labor market attachment, earnings, disposable income, educational attainment, family formation, criminal involvement and welfare dependency. In doing so, we contribute to a large and growing international literature on the importance of investments in early childhood for child development. Background Duncan and Brooks-Gunn (1997) were the first to take a broad look at the possible longer-run consequences of early childhood poverty in the U.S.. Twelve groups of researchers working with 10 different non-experimental but longitudinal data sets estimate longitudinal

models of early childhood income effects on later attainment, behavior, and health. On the whole, the results suggest that family income has substantial, albeit selective associations with children's subsequent attainments. First, family income had consistently larger associations with measures of children's cognitive ability and achievement than with measures of behavior, mental health and physical health. Second, family economic conditions in early childhood appeared to be more important for shaping ability and achievement than did family economic conditions during adolescence. And third, the association between income and achievement appeared to be non-linear, with the biggest impacts at the lowest levels of income. More recently, Duncan, Ziol-Guest, and Kalil (2009), using long-run U.S. data from the Panel Study of Income Dynamics, illustrated the consequences of poverty between a childs prenatal year and fifth birthday for a host of adult achievement, health, and behavior outcomes, measured as late as age 37. Controlling for economic conditions in middle childhood and adolescence, as well as demographic conditions at the time of the birth, they find statistically significant and, in some cases, quantitatively large detrimental effects of early poverty on a number of attainment-related outcomes (adult earnings and work hours), some health outcomes (adult body mass) but not on such behavioral outcomes as out of wedlock childbearing and arrests. Most of the adult earnings effects appeared to operate through early povertys association with adult work hours. Typically, the economics literature has ignored the notion that the effects on childrens development of economic conditions may depend upon childhood stage and instead focuses on the role of permanent income, with the assumption that families anticipate bumps in their lifecycle paths and can save and borrow freely to smooth their consumption across these bumps (Blau, 1999). However, there are several reasons to think that the family income during early

childhood is critical for childrens long-term attainments. Cunha, Heckman, Lochman, and Masterov (2005) propose an economic model of development in which preschool cognitive and socio-emotional capacities are key ingredients for human capital acquisition during the school years. In their model, skill begets skill and early capacities can affect the productivity of school-age human capital investments. To the extent that cognitively-enriching early home environments lay the groundwork for success in preschool and beyond, parents ability to purchase books, toys, and enriching activities during this stage of development is paramount (Yeung, Linver, & Brooks-Gunn, 2002). Income and economic insecurity can also affect parental abilities by influencing parents mental health. Parental psychological stress or harsh parenting behaviors can be especially detrimental during early childhood (Godfrey & Barker 2000; Shonkoff & Philips 2000; Bronfenbrenner & Morris 1998; Mayer 1997) given the primacy of sensitive mother-child interactions for the development of young childrens emotion regulation (Waters & Sroufe, 1983). For example, mastery of emotion regulation in early childhood can have long-run impacts on childrens achievement, behavior, and health (Fox, 1994). Finally, early childhood stressors related to low income could interfere with critical periods in biological development, for example by altering or dysregulating biological systems, with adverse implications for future health (Godfrey & Barker, 2000). Methods for assessing causal impacts of poverty Researchers generally do not dispute simple correlations between income and child developmental outcomes, but there is much controversy about whether these correlations can be given causal interpretations. Unobservable determinants of childrens adult outcomes that are correlated with early childhood family income, like parental abilities, are of key concern in

assessing the causal impact of early family income on childrens adult outcome. Studies using more sophisticated methods to address this omitted variable problem have recently emerged. Brooks-Gunn et al. (1998), Blau (1999), Humulm (2008) and Duncan et al. (2009) handle the omitted-variable problem by controlling for family characteristics (observed and unobserved), while Milligan & Stabile (2008) and Dahl & Lochner (2008) utilize reforms in child transfer programs and tax rules in Canada. A recent series of studies have used Scandinavian registry data to examine these questions. In an approach quite similar to the one we take here, Aakvik, Salvanes, & Vaage (2005) find that family income when children are 0-6 years of age is a significant predictor of childrens educational attainment and that the effect of early childhood income on childrens eventual years of schooling is about twice as big as the effect of income during the years 16-18, even when permanent income is controlled. Other recent studies using administrative registers from Statistics Norway have used displacement of fathers as a consequence of plant closings (to indicate an exogenous earnings shock) to examine the intergenerational consequences of income shocks. In one such approach, Rege et al. (2007) find that fathers job losses occurring as a result of plant closures have an adverse effect on adolescents high school performance rates (though the effect does not seem to be driven by income losses, suggesting a potentially adverse effect owing to the social distress of unemployed fathers). Bratberg et al (2008), also using those data, analyze the effects of worker displacement in 1982-1985 on their childrens earnings in 1999-2001, when the children are 25-30 years old. They find that although displacement appears to have a negative effect on earnings and employment of those affected, there are no significant effects on offsprings earnings. This study, however, did not distinguish income losses in

different childhood periods, nor does it capture income losses that might have occurred during the early childhood period. Though methodological concerns remain, evidence seems to be emerging that there are some causal effects of childhood family income on early adolescent and adolescent outcomes. However, whether this effect persists into adulthood is less clear. Moreover, studies using more sophisticated methods in addressing the omitted-variable problem are almost exclusively utilizing data from North-America, and comparative studies (across countries) using such methods do not yet exist. The approach we pursue here is to relate an array of adult attainments to age-specific measures of childhood income. We use children born in Norway between 1968-1979 to assess the impact of early childhood family income on outcomes of the child measured from age 25 to 40 (i.e. until 2008). Our work extends that of Aakvik et al. (2005) by including more cohorts, adopting a longer time horizon, examining a broader array of outcomes, and using a more comprehensive measure of childhood income than that study did. To avoid attributing to income what should be attributed to correlated determinants of both childhood income and adult outcomes, we include a number of key control variables (including household wealth) available around the time of birth of the child. Our estimates of the impact of early childhood income on adult attainment include controls for income in middle childhood and adolescence; and we control for any time-invariant family characteristics using sibling fixed effects. If few or no intergenerational effects of low-income in early childhood are found, our results would add to the evidence that the Scandinavian egalitarian welfare model helps to mitigate the effects of family background and potentially correlated credit constraints imposed by low income in the family of origin. On the other hand, if intergenerational effects are

identified despite the context of a strong safety net, that would suggest (assuming a causal impact) that low-income in early childhood affects long-run outcomes through other channels, such as parental mental health, parenting behavior, or perhaps through direct influences on childrens physiological development. Methods Sample We use administrative register data compiled by Statistics Norway, which includes every individual in the entire resident population of Norway, on average consisting of more than 50,000 children born each year. Because the data provide information on all residents born in Norway, is it possible to link information on parents to children around the time of birth and throughout childhood. Additionally, a host of measures of the childs adolescent and adult outcomes are generally available from 1992 until 2005. The outcomes span multiple dimensions and this study examines achievement-related outcomes including earnings, labor force attachment, and educational attainment. The target study sample consists of all men and women born between 1968 and 1979, so that children are observed between their prenatal year and adulthood. Thus these individuals are between 26 and 37 in the most recent year of data available (2005). This includes 765,811 children born in these years. To make our comparisons to the United States, we use 1968-2005 data from the Panel Study of Income Dynamics, which has followed a nationally-representative sample of families and their children since 1968. Our target study sample consists of individuals born to a sample member into PSID households between 1968 and 1975, who thus were between ages 30 and 37 in 2005. Sample losses to nonresponse are substantial, prompting us to use the PSIDs attrition-

adjusted weights in all of our analyses. Our final sample consists of 1,589 respondents who participated in the PSID in adulthood and had nonmissing data on at least one outcome and a PSID attrition-adjusted weight Childhood income We created a measure of household income in each year of the childs life starting in the prenatal year.1 Norwegian total household income in Kroner includes the following: (1) income originating from the tax files which includes net income that is subject to taxation (earnings from labor, unemployment money, sick leave money, pensions, income from self-employment, and income from capital including interest and dividends); (2) child allowance transfers; and (3) transfers of social assistance from the government. These values are calculated for the childs mother and added to the amount reported for the mothers cohabitant (generally her husband) and inflated to 1998 levels using the Consumer Price Index. For the US comparison, we used the PSIDs high-quality edited measure of annual total family income, inflated to 2005 levels using the Consumer Price Index. We averaged these annual income measures across three periods: the prenatal year through the calendar year in which the child turned five; ages six to ten; and ages 11 to 15. To account for a possible differential impact of increments to low as opposed to higher family income, we allowed the coefficients on average income within each childhood period to have distinct linear effects for average incomes up to 120,000 NOK and $25,000 and for incomes 120,000 NOK and $25,000 and higher. Adult Outcomes
With income reported for calendar years and conceptions occurring continuously, there was some imprecision in matching income to the prenatal year. If a child was born prior to July 1, we took the prenatal year to be the prior calendar year. If the birth was after July 1, then the prenatal year was considered to be the year in which the birth occurred. Similarly, we defined under age 6 as the last calendar year before the childs sixth birthday. Thus defined, our early childhood period consists of seven calendar years.
1

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Dependent variables in our analyses spanned employment and educational domains. Employment in the Norwegian registry was captured using adult earnings and average weekly work hours. First, the natural logarithm of the childs adult earnings were gleaned from all available annual reports of earned income reported for the child when the child was age 24 or older. As with childhood income, we inflated the Kroner values of earnings to 1998 price levels using the Consumer Price Index (CPI). Second, employment experiences are captured with the average weekly hours worked starting at age 24. Finally, years of completed schooling are based on the report at or around age 24. The PSID measures include log of adult earnings, average annual work hours after age 24, and years of completed schooling. Control Variables and Regression Procedures To avoid attributing to income what should be attributed to correlated determinants of both childhood income and our outcomes of interest, we included the following control variables in all of our regressions using the Norwegian registry data: i) birth year fixed effects; ii) child sex (female=1); iii) whether the child was the first born to his/her mother; iv) the total number of siblings born to the childs mother and father; v) years of completed schooling of the mother and the father; vi) the age of the mother at the time of the birth; vii) whether the childs mother was married at the time of the birth or whether the childs mother was cohabiting at the time of the birth; and viii) a combination of mothers reported wealth and mothers spouses reported wealth at the time of the childs birth. In the case of the PSID, background controls consist of birth year dummies, race, sex, whether the childs parents were married and living together at the time of the birth, mothers age at birth, region, number of siblings, parent schooling, parent test score, cleanliness of the

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house, parents expectations for child, parent achievement motivation, parent locus of control and parent risk avoidance. All of our OLS regressions were run in STATA 10.0 SE, adjust for origin-family clustering on the mother using Huber-White methods, and include more than 14,000 municipality fixed effects (Norwegian registry only). Similar analysis is presented for comparative purposes using the PSID, adapted from Duncan, Ziol-Guest, and Kalil (forthcoming). Results Sample Description Table 1 presents the descriptive statistics of the Norwegian sample, primarily coming from the year of the childs birth, as well as the PSID sample born between 1968 and 1975. These 765,811 Norwegian children represent 424,906 families. Forty-two percent of the children in both samples are first born; PSID children have more siblings, on average than do Norwegian children. Parental schooling levels around the time of the childs birth are slightly higher in the PSID than in Norway. Norwegian mothers average 26 years of age when the child was born, which was roughly 1.5 years older than PSID mothers. At the time of the childs birth the vast majority of these mothers were married and these households had average wealth of 35,900 Kroner.2 Average annual income in each of the three periods illustrate that household income increases over the childs lifetime with an average of 210,530 Kroner (about 38,000 USD) in the prenatal to age 5 year period; 260,909 Kroner (48,000 USD) between age 6 and 10; and 292,093

Details on all of the PSID family background measures are provided in Duncan et al., forthcoming.

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Kroner (54,000 USD) between age 11 and 15.3 These period incomes are on average smaller than comparable US estimates, and have considerably less variance. On average by age 24 the Norwegian cohorts had completed 12.9 years of schooling; the comparable PSID sample average is 13.4 years. On average, the Norwegian cohorts had annual earnings after age 24 of 197,000 kroner, the equivalent of $32,000 (2005 dollars), a bit less than the PSID average of $34,500. For hours worked per week we do not have data that are directly comparable. The Norwegian data include contracted hours per week in ones main position only, and is almost 25 hours per week after age 24. The PSID has a measure of annual hours worked, which average roughly 36 hours per week. Multivariate Analysis Table 2 presents results from a series of descriptive regressions for both the Norwegian and PSID samples. Across the columns of the first row, each outcome is regressed only on a measure of 17-year average childhood income (prenatal through age 15). All coefficient estimates are standardized, so first-row entries amount to simple correlations between income and each of the outcomes. As expected, all of the correlations are positive, although much smaller in the Norwegian than US sample. In the second row (Model 2) results, the simple correlations shown in the first row are adjusted for the extensive set of background control variables, all of which measured either before or right around the time of birth, available in both data sets. In the US data all of the coefficients become considerably smaller. Thus, a substantial portion of the simple correlation between childhood income and most adult outcomes can be accounted for by the

In order to convert Norwegian income data into current U.S. dollars, we first converted all Kronor data into 1998 Norwegian price levels, with 1998 chosen because it is approximately in the middle of the period over which outcomes are measured. We then converted the 1998 Kronor figures into U.S. dollars using the 1998 average exchange rate. Finally, we inflated the 1998 U.S. dollar figures into 2005 dollars using the U. S. CPI.

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disadvantageous conditions associated with birth into a low-income household. However, for the Norwegian sample, while the coefficient on income predicting years of schooling declines, increases are found on the income coefficients predicting average annual earnings and weekly work hours. To assess whether increments to low income may matter more than increments to the incomes of children growing up in middle-class or affluent families, we regressed the adult outcomes on the natural logarithm of the 17-year average childhood income, plus background controls. Whereas our first two models assumed that an incremental dollar or kronor increase to a poor familys income had the same beneficial effect on a childs adult outcomes as the same increase to an affluent familys income, the logarithmic transformation assumes equal percentage effects. Higher standardized coefficients (in absolute value) in logarithmic as opposed to linear models would suggest that money may matter more for the outcomes of children reared in lower than higher income households. As shown in the third (Model 3) row of Table 2, the standardized coefficients for the logarithmic models are uniformly higher than coefficients for the linear models (Model 2) for both the Norwegian and US samples, although the jumps are considerably higher in the PSID. To address the issue of the childhood stage-specificity of income effects, the final (Model 4) regressions in Table 2 replace the single 17-year average log childhood income measure with three childhood stage-specific measures of log income. All background controls are included in these models. With each childhood stage accounting for approximately one-third of childhood, we would expect that the three coefficients should (approximately) sum to the all-childhood coefficient presented in Model 3. If childhood income mattered equally across all three stages,

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the three coefficients should be roughly the same size and about one-third the magnitude of the Model 3 coefficients. In the case of adult earnings and work hours among the US sample, early childhood income appears to matter much more than later income. For work hours, the standardized coefficient on prenatal-to-age 5 log average income (.20) is just as large as the Model-3 coefficient on all-childhood log average income, suggesting little role for income beyond age 5. Early income also has a statistically significant coefficient (p<.05) in the case of completed schooling, but in this case adolescent income has a considerably larger standardized coefficient. Among the Norwegian birth cohorts, adolescent income appears to matter more than childhood income for years of completed schooling, although the adjusted correlation is considerably smaller in the Norwegian relative to the PSID data. In the case of adult earnings and average weekly hours worked in the Norwegian data, early childhood and adolescent income have similar coefficients, with the early childhood associations much smaller in the Norwegian than U.S. data. Taken together, the descriptive regression results shown in Table 2 suggest that childhood stage matters in understanding links between childhood income and adult success, although not as much in the Norwegian than U.S. data. Moreover, many of the adult outcomes appear to be more sensitive to increments to low as opposed to middle-class or higher family incomes. A more detailed look at childhood-specific income effects is provided in the regression models shown in Table 3. For each childhood stages income, two spline coefficients are presented. The first reflects the estimated effect of an additional $10,000 annual income in the given stage for children whose income in that stage averaged less than 120,000 Kroner (1998

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NOK) for the Norwegian sample and less than $25,000 (2005 USD) in the PSID sample. All three sets of income variables, plus background controls listed at the bottom of each panel, are included in all regressions. The column labeled Different slopes reports results from a statistical test of the null hypothesis of equal within-period slopes. The final row shows results for a test of equality of all three lower-income segment slopes. In contrast to Table 2, coefficients in Table 3 are unstandardized and therefore show changes in originally-scaled dependent variables associated with $10,000 increments to average childhood stage-specific income. In the case of the Norwegian regressions, the coefficients have been rescaled by the Dollar/Kronor exchange and inflation rates using the procedures described in footnote 3 so that both sets of coefficients reflect changes in the dependent variables associated with a $10,000 annual increment in stage-specific income. The less than 120,000 Kroner and less than $25,000 results are termed the lower-income segment; the other results relate to what we will term the higher-income segment. Table 3 shows that additional income in the prenatal to age five period for the lowestincome Norwegian children is associated with significantly greater years of schooling, adult earnings and work hours; and greater earnings and work hours for the US sample. In the PSID the coefficient on early income in the schooling regression is .19 years, which is similar to the Norwegian coefficient but far from being statistically significant at conventional levels (p=.569). Findings from the regressions on natural log earnings illustrate the income effects of early-childhood income. The .14 and .52 coefficients mean that, adjusting for income later in childhood and the other control variables, an additional $10,000 per year of family income between the prenatal year and the childs fifth birthday is associated with respective increases in the natural logarithm of adult earnings of .14 (or 15.5%) or .52 (68.2%) in the Norwegian and

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US samples. In contrast, increments to early-childhood income for higher-income children are associated with a significant .013 increase (1.3%) and an insignificant .05 increment in log earnings in the two countries. The p-value reported in the different slopes column indicates that the slope for the lower income early childhood group is significantly different from the slope for those higher incomes. In all situations, the lower and higher groups within each age range differ among the Norwegian sample. Increments to incomes in middle childhood and adolescence are estimated to have non-significant impacts on the US samples log earnings, even among low-income children. The final row of Table 3 indicates the p-value at which the three coefficients on the lower-income spline slopes across the childhood stages are significantly different from one another. As might be expected from the very large Norwegian sample sizes, these three sets of coefficients are statistically different for all three outcomes in the Norwegian sample. In the case of the PSID sample, results for work hours are broadly similar to those for earnings, with a highly significant estimated impact of early childhood but not later childhood income. The Norwegian data also yield a larger estimated impact of increments to low income early in childhood as compared with later periods. In the case of American children, a $10,000 annual increase in the prenatal to age five income of low-income families is associated with more than 500 additional work hours per year after age 25. For the Norwegian sample, a similar increase among the lower income group in early childhood is associated with 2.2 hours per week more per year after age 24 (equivalent to about 114 hours per year). Figures 1-3 summarize the nature of the early childhood income effects for our three outcomes. These estimates come from regressions that include dummy variables for early childhood income, and controls for income later in childhood as well as the background controls

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discussed earlier. All three graphs show much steeper income gradients for U.S. than Norwegian children. Sibling Fixed Effects One concern in these types of analyses is omitted variable bias, and one approach to deal with this concern is to conduct sibling difference models which capitalize on within family variation (Johnson & Schoeni, 2007). We tested these models in the Norwegian registry data for all three adult outcomes, and used each of the 17 years of childhood income. Table 4 presents the coefficients and standard errors for both an OLS analysis and a sibling fixed effects analysis on all three measures of achievement. The coefficients are graphed in Figures 4-6. All of the OLS regressions include our set of baseline controls. Given the intercorrelations among the single-year income measures, the OLS results are less trustworthy than the corresponding fixed-effects estimate.4 For each of the three outcomes, the OLS estimates suggest an unusually strong positive impact of age-15 income and, if anything, an increasing association between income and the achievement outcome as children age. In contrast, the sibling fixed effects estimates are more consistently positive in the early childhood years than later.

Finer and finer divisions of childhood income reduce the precision of OLS estimates but increase the precision of sibling fixed effect estimates.

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References Aakvik, A. Salvanes, K. & Vaage, K. (2005). Educational attainment and family background. German Economic Review, 3 (3), 377-394. Bjorkland, A. & Jantti, M. (2000). Intergenerational mobility of socio-economic status in a comparative perspective. Nordic Journal of Political Economy, 26, (1), 3-33. Blau, D.M. 1999. The Effect of Income on Child Development, The Review of Economics and Statistics, 81(2), 261-276. Bratberg, E. . A. Nilsen & K. Vaage (2007). Trends in intergenerational mobility across offspring's earnings distribution in Norway. Industrial Relations, 46(1), 112-129. Bratberg, E. . A. Nilsen & K. Vaage (2008). Job Losses and Child Outcomes. Labour Economics, 15, 591-603. Cunha, F., Heckman, J. J., Lochner, L., & Masterov, D. (2005). Interpreting the evidence on life cycle skill formation. In E. Hanushek and F. Welch (Eds.), Handbook of the Economics of Education. North Holland. d'Addio, A.C., 2007, Intergenerational Transmission of Disadvantage: Mobility or Immobility Across Generations?, OECD Social Employment and Migration Working Papers, No. 52. Dahl, G. & L. Lochner 2008. The impact of family income on child achievement: Evidence from the earned income tax credit. NBER working paper 14599. Duncan, G. & J. Brooks-Gunn (eds.) 1997. The Consequences of Growing up Poor. Russel Sage. New York. Duncan, G., Ziol-Guest, K. M., & Kalil, A. 2009. Early Childhood Poverty and Adult Attainment, Behavior and Health, Child Development, forthcoming.

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Fox, N. (1994). The development of emotion regulation: biological and behavioral considerations. Monographs of the Society for Research in Child Development, 59. Godfrey, K. M., & Barker, D. J. P. 2000. Fetal nutrition and adult disease. American Journal of Clinical Nutrition, 71, 1344S-1352S. Holzer, H., Schanzenbach, D., Duncan, G. and Ludwig, J. (2007) The Economic Costs Of Poverty In The United States: Subsequent Effects Of Children Growing Up Poor Center for American Progress, Washington, D.C., 2007. Humulum, M. K. 2008. Timing of family income, borrowing constraints and child achievement. Economics Working Paper 2008-12, University of Aarhus. Knudsen E., Heckman, J., Cameron, J., Shonkoff, J. 2006. Economic, neurobiological, and behavioral perspectives on building Americas future workforce. PNAS, 103, 10155 10162. Milligan, K. & M. Stabile 2008. Do child tax benefits affect the wellbeing of children? Evidence from Canadian child benefit expansions, NBER working paper 14624. Schjlberg, S., R. Lekhal, M. V. Wang, I. M. Zambrana, K. S. Mathiesen, P. Magnus, C. Roth, 2008, Forsinket sprkutvikling: En forelpig oversikt basert p data fra Den norske mor og barn underskelsen, Rapport 2008:10 Nasjonalt folkehelseinstitutt. Strand, B. & Kunst, A. (2007). Childhood Socioeconomic Position and Cause-specific Mortality in Early Adulthood. American Journal of Epidemiology,165(1):85-93. Waters, E., & Sroufe, L.A. (1983). Social competence as a developmental construct. Development and Psychopathology, 3, 79-97.

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Yeung, W.J., Linver, M, & Brooks-Gunn, J. (2002). How money matters for young children's development: Parental investment and family processes. Child Development, 73, 18611879.

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Table 1 Descriptive Statistics of Sample from Norwegian Registry and PSID Norwegian Registry Mean or Proportion SD Childhood income Prenatal to age 5 210,530 94,441 Age 6 to age 10 260,910 114,440 Age 11 to age 15 292,093 147,269 P-5 (2005 USD) 38,807 17,409 6-10 (2005 USD) 48,094 21,095 11-15 (2005 USD) 53,842 27,146 Female First born Number of siblings Mother education Father education Age of mother at birth Mother marital status at birth Married Cohabiting Not married or cohabiting Household wealth (10k NOK) Outcomes Completed schooling (years) Average annual earnings Earnings (10k) Earnings (10k 2005USD) Average Work Hours 49% 42% 1.96 11.01 11.60 26.32 91% 6% 1% 3.59 12.91 197.78 32.37 24.37 ----1.29
2.09

U.S. PSID Mean or Proportion 47,842 54,226 59,068 ------47% 42% 2.21 --12.09 24.84 84% n/a n/a --13.39 34.56 --1892.46

SD 28,341 39,013 45,369 ----------1.79 --2.94 5.76 --------2.14 30.93 --699.30

2.73 5.32 ------49.42 2.24 101.91 16.68 11.73

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Annual equivalent Weekly equivalent n

1267.24 --765,811

-----

--36.39 1,589

-----

Note: The Norwegian birth cohorts are 1967-1979 and the PSID birth cohorts are 1968-1975. Norwegian childhood income in 2005 USD uses the average exchange rate between 1968 and 1992 of 6.5, and Norwegian earnings in 2005 USD uses the average exchange rate from 1992-2005 of 7.32.

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Table 2 Standardized Regression Coefficients from Various Models of Childhood Income and Adult Outcomes Norwegian Registry Years Years completed Annual Weekly completed schooling earnings work hours schooling .18** .06** .05** .34** Model 1--No controls; 17-year Prenatal to average childhood income age 15

PSID Annual earnings .31** Weekly work hours .15**

Model 2--Background controls; 17year average childhood income

Prenatal to age 15

.07**

.09**

.08**

.14**

.23**

.11**

Model 3--Background controls; natural logarithm of 17-year average childhood income

.10** Prenatal to age 15

.11**

.11**

.22**

.37**

.20**

Model 4--Background controls; natural logarithm of average stagespecific childhood income

Prenatal to age 5 Age 6 to age 10 Age 11 to age 15

.01** .02** .09**

.05** .02** .06**

.05** .01** .07**

.10* -.04 .18**

.27** .06 .08

.20** -.03 .06

Note: ** p < .01. * p <.05.

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Table 3 OLS Spline Regression Models of Childhood Income and Completed Schooling, Adult Earnings, and Work Hours Norwegian Registry Years of completed schooling ln Earnings Weekly hours worked Different Different Different slopes? slopes? slopes? Average annual income <120K .219** p < .001 .144** p < .001 2.188** p < .001 Prenatal to age 5 (.002) (.001) (.013) >120K .013** .013** .106** (.001) (.000) (.003) Average annual income Age 6 to 10 <120K >120K .175** (.003) .013** (.001) .406** (.003) .050** (.001) p < .001 .069** (.001) .006** (.000) .119** (.001) .013** (.000) p < .001 1.063** (.014) .063** (.003) 1.625** (.014) .181** (.003) p < .001

Average annual income Age 11 to 15

<120K >120K

p < .001

p < .001

p < .001

p from test of equality of p<.001 p<.001 p<.001 three <120K spline segments Note: All regressions include controls for sex, first born, number of siblings, mother and father education around birth, age of mother at birth, marital status of mother at birth, and household wealth at birth. Birth year and municipality fixed effects included and standard errors corrected to account for presence of siblings by clustering on the mother's ID.

26

Table 3 continued Years of completed schooling Different slopes? 0.19 ns (.33) 0.03 (.04) .65** (.25) -0.06 (.04) -0.31 (.20) .09** (.03) p < .01 PSID ln Earnings Different slopes? .52* p < .05 (.21) .05** (.02) 0.14 (.14) 0.01 (.02) 0.04 (.12) 0 (.01) ns Annual hours worked Different slopes? 506.74** p < .001 (135.39) 20.60* (9.78) -60.82 (109.42) 1.28 (8.36) 74.18 (83.33) -0.92 (7.56) ns

Average annual income Prenatal to age 5

<$25K >$25K

Average annual income Age 6 to 10

<$25K >$25K

Average annual income Age 11 to 15

<$25K >$25K

p < .10

ns

ns

p from test of equality of p=.04 p=08 p=.01 three <$25K spline segments Note: All regressions include the following background controls: birth year dummies, race, sex, whether the childs parents were married and living together at the time of the birth, mothers age at birth, region, number of siblings, parent schooling, parent test score, cleanliness of the house, parents expectations for child, parent achievement motivation, parent locus of control and parent risk avoidance.

27

Table 4 OLS and Sibling Fixed Effects Regression Models of Schooling, Earnings and Work Hours in Norwegian Registry Years of completed schooling ln Earnings Weekly hours worked OLS Fixed Effects OLS Fixed Effects OLS Fixed Effects B SE B SE B SE B SE B SE B SE Log income Prenatal .010 *** .001 .003 * .002 .006 *** .001 .084 *** .006 .012 .009 .001 .001 -.007 * .003 -.007 .004 .004 ** .091 *** .015 -.017 Birth year .002 -.003 * .002 .023 .006 .004 .008 .006 .113 *** .022 .060 Age 1 .007 *** .002 .004 .002 .032 .008 .012 *** .002 Age 2 .006 .006 .004 .001 .003 .182 *** .030 .055 .046 .030 *** .007 .024 ** .009 .015 *** .003 .135 *** .033 -.024 Age 3 .002 .004 .050 .028 *** .007 .017 .009 .012 *** .003 .149 *** .035 .036 Age 4 .001 .004 .051 .011 .007 -.002 .010 .157 *** .035 .074 Age 5 .011 *** .003 .005 .004 .052 .015 * .007 -.002 .010 .007 * .029 .035 -.039 Age 6 .003 -.008 * .004 .053 .020 ** .007 -.020 * .010 .011 *** .003 .175 *** .036 .060 Age 7 .003 .004 .054 .013 .007 -.007 .010 .007 ** .121 ** .036 -.078 Age 8 .003 -.008 * .004 .054 .026 *** .007 -.011 .010 .104 ** .037 .063 Age 9 .009 ** .003 .000 .004 .055 .039 *** .007 -.001 .010 .010 ** .117 ** .037 -.070 Age 10 .003 -.007 .004 .056 .012 .007 -.025 * .010 .012 *** .033 -.004 .159 *** .380 .012 Age 11 .004 .056 .038 *** .007 -.001 .010 .009 ** .121 ** .038 -.066 Age 12 .033 -.012 ** .004 .056 Age 13 .040 *** .008 -.001 .010 .009 ** .003 .003 .004 .132 *** .037 -.062 .056 Age 14 .068 *** .008 -.030 ** .010 .016 *** .003 -.008 * .004 .292 *** .038 -.017 .057 Age 15 .170 *** .007 -.005 .010 .041 *** .003 -.004 .004 .527 *** .033 -.017 .053 Note: *** p < .001. ** p < .01. * p <.05.

28

Figure 1

D ummy variable es timates of the effects of early childhood income on years of s chooling
15 14.5 14 13.5 13 12.5 12 11.5

Norway

US

10 ,4 77

57 ,6 66

E arly childhood income in US $

79 ,9 83

38 ,6 81

29 ,3 35

20 ,0 41

48 ,1 57

1, 67 3

29

Figure 2

D ummy variable es timates of the effects of early childhood income on log earnings (relative to high income)
0.5

10 ,4 77

38 ,6 81

20 ,0 41

29 ,3 35

57 ,6 66

48 ,1 57

-0.5

-1

Norway
-1.5

US

-2

E arly childhood income in US $

30

79 ,9 83

1, 67 3

Figure 3

D ummy variable es timates of the effects of early childhood income on weekly work hours
45 40 35

Norway
30

US
25 20 15 10

57 ,6 66

29 ,3 35

10 ,4 77

20 ,0 41

38 ,6 81

48 ,1 57

E arly childhood income in US $

79 ,9 83

1, 67 3

31

Figure 4

O L S and s ibling F E es timates of the effects of age s pecific childhood income on years of completed s chooling
.200

OLS
.150

FE

.100

.050

.000
Pr en at a Bi rth l ye ar Ag e 1 Ag e 2 Ag e 3 Ag e 4 Ag e 5 Ag e 6 Ag e 7 Ag e 8 Ag e 9 Ag e 10 Ag e 11 Ag e 12 Ag e 13 Ag e 14 Ag e 15
32

-.050

Figure 5

O L S and s ibling F E es timates of the effects of age s pecific childhood income on log earnings
.050

OLS
.040 .030 .020 .010 .000 -.010 -.020

FE

Pr en at a Bi rth l ye ar Ag e 1 Ag e 2 Ag e 3 Ag e 4 Ag e 5 Ag e 6 Ag e 7 Ag e 8 Ag e 9 Ag e 10 Ag e 11 Ag e 12 Ag e 13 Ag e 14 Ag e 15
33

Figure 6

O L S and s ibling F E es timates of the effects of age s pecific childhood income on weekly work hours
.600 .500

OLS
.400 .300 .200 .100 .000 -.100 -.200

FE

Pr en at a Bi rth l ye ar Ag e 1 Ag e 2 Ag e 3 Ag e 4 Ag e 5 Ag e 6 Ag e 7 Ag e 8 Ag e 9 Ag e 10 Ag e 11 Ag e 12 Ag e 13 Ag e 14 Ag e 15
34