Research Professor Robert Kaestner Assesses Effects of Increased Income on Infant Health

In a new working paper, “Effects of Income on Infant Health: Evidence from the Expanded Child Tax Credit and Pandemic Stimulus Checks,” Harris Research Professor Robert Kaestner used data from birth certificates that included measures of infant health and maternal demographic information to investigate the relationship between receiving COVID-19-related income transfers and the health of the newborn–and found that sometimes, money isn’t everything.

“It seemed straightforward: if we gave people more income, they would use it to improve the mother’s health and invest in the child’s health, whether that meant more medical care or better nutrition,” Kaestner said. 

One argument to support policy for improving infant health is that greater income leads to better outcomes. Those with more financial resources have better access to the doctors and medical treatments necessary to achieve healthy outcomes, the theory goes; therefore, increasing incomes of expectant mothers should improve the health of their children.

A mother’s access to quality prenatal care can affect the likelihood of preterm birth, birth weight, as well as infant growth and development, all of which have been linked to a variety of other childhood and adult outcomes. A 2016 paper shows that infants in the bottom quintile of income are more than twice as likely to experience negative outcomes such as low birthweight than those in the top quintile of income (Martinson & Reichman, 2016). Creating policy that reduces these health disparities therefore often revolves around income transfers and other means of financial assistance.

The COVID-19 pandemic, and the stimulus checks provided to individuals during that time, presented a unique opportunity for researchers. Every adult received up to $3,200 and up to an additional $2,500 for each child across the three stimulus disbursements. This meant that some families were given several thousand dollars to offset the financial strain caused by COVID-19.  In addition to that, an expanded Child Tax Credit affected over 60 million children across the country.

What Kaestner and his co-authors Wei Lyu and George Wehby found, however, was very little evidence of a causal relationship between the income transfers and infant health. Their research suggested that the benefit of an income increase similar to what was seen during the pandemic, is negligible.

Kaestner compared this study to prior literature focused on policies such as the minimum wage or the Earned Income Tax Credit. In a previous study done by the authors of this paper, they found that in places with a higher minimum wage, the mother’s income increased, which did have a small positive effect on infant health. The same was found for the EITC; the subsidy for wages had a small, positive impact. Relative to these studies, the effect from a pandemic-related income transfer was close to zero.

“Our evidence would suggest that these types of programs that provide an income transfer solely during the pregnancy will not be an effective way to address disparities in infant health, whether they be socioeconomic or racial, ethnic disparities,” Kaestner said.

These results do not, however, preclude attempting to improve infant health through other policies offering financial assistance to expectant mothers. In Europe, several countries have long-term programs that provide payments to women during their pregnancies. In the U.S., the Women, Infants, and Children Program (WIC) serves a similar purpose: trying to ensure women have proper nutrition.

Kaestner said that longer periods of sustained income transfers may be beneficial in improving infant health outcomes. Having a larger income for five to ten years before and after giving birth, he said, would not be the same as having one large cash transfer in the year before birth.

From this paper, Kaestner and his co-authors determined that the answer of how additional income during the pregnancy affects infant outcomes may be more limited than assumed.

“While it seems likely and sensible that more income would be better than less, improving infant health, the evidence to support that intuition is really not that strong,” he said. “It might take a more sustained period of investment or transfers of income to have an impact.”