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Review on the impact of money on children’s outcomes (The London School of Economics and Political Science, 2013)


New research commissioned by the Joseph Rowntree Foundation examines the causal relation between household income and children’s outcomes later in life. The report by Kitty Stewart and Kerris Cooper (Centre for Analysis of Social Exclusion, London School of Economics and Political Science)  consists in a systematic review of the evidence from abroad on a range of social, educational, medical and social and behavioural outcomes for children. One key finding is that money does make a difference to children’s outcomes: the relationship between children’s wealth and their cognitive, health and social-behavioural outcomes goes beyond simple correlation – poorer children do worse in these areas in part because they are poorer.

Methods and scope of the work

The systematic review analysed 34 eligible studies from 1988-2012, exploiting evidence from the United States, but also the UK, Norway and Mexico.  It touched on a range of questions: whether money makes a difference, how much difference it makes, why household income matters, whether it matters more at certain ages than in others, how long the effects last for. The level of evidence is strongest for the impact on cognitive development and educational attainment, and for social-behavioural development of children. The authors found that the majority of studies reviewed identified a positive impact of income on numerous children’s outcomes, be they educational (with US studies finding an impact on children’s achievement at school), health-related (with Mexican studies noticing improved BMI-for-age associated with cash transfers), or socio-behavioural (several studies highlighted a relation between  achievement at school and higher household income levels). The authors also reviewed studies with evidence on intermediate outcomes such as maternal mental health or the broader home learning environment.

Findings on money and outcomes for children

Certain studies indicate that the effect size on schooling and cognitive outcomes associated with an increase in income of $1000 were about the same size as the estimated effects of spending similar amounts on early education interventions or school. Data from these studies suggests that increases in household income could be expected to substantially reduce the differences in outcomes between lower socio-economic background children and others, although it may not eliminate these differences