Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2015. The project is a required component of every master program.
Genevieve Jeffrey, Yi-Ting Kuo, Laura López and Stella Veazey
Economics of Public Policy
We examine the effect of income on birth weight by employing two identification strategies using US Vital Statistics Natality data. First, following a study by Hoynes et al. (2015), we take advantage of an exogenous increase in income from the Earned Income Tax Credit using a difference-in-differences methodology. The Earned Income tax credit (EITC), enacted in 1975, is a refundable transfer to lower-income working families through the tax system and is one of the primary tools used in the United States to fight poverty. The EITC underwent an expansion is 1993 (Omnibus Budget Reconciliation Act), increasing the maximum credit families with and without children could receive. Following Hoynes et al. (2015), we take advantage of the difference in maximum credit available for families with different numbers of children. We find that the increase from the EITC reduces the incidence of low birth weight and increases mean birth weight. In addition, we discover that maternal smoking and drinking behavior during gestation is reduced.
Next, in order to try to capture the effect of income on birth weight across the population (as opposed to just high-impact groups), we exploit income variation from a policy change in Alaska that allowed payments from oil wealth to be distributed to all Alaska residents. We employ a comparative case study methodology using a synthetic control group following Abadie et al. (2010). Our comparison group is comprised of a combination of North Dakota, Oregon, Delaware, Kentucky and Nevada. The analysis shows a substantial increase in Alaska’s average birth weight over its synthetic counterpart around the onset of the policy. However, we refrain from attributing the divergence to the dividend payments alone, given significant changes in Alaska’s economy that coincide with the policy and are not well-mirrored by the control states.