Does Household Income Affect children’s Outcomes? A Systematic Review of the Evidence

Abstract There is abundant evidence that children in low income households do less well than their peers on a range of developmental outcomes. However, there is continuing uncertainty about how far money itself matters, and how far associations simply reflect other, unobserved, differences between richer and poorer families. The authors conducted a systematic review of studies using methods that lend themselves to causal interpretation. To be included, studies had to use Randomised Controlled Trials, quasi-experiments or fixed effect-style techniques on longitudinal data. The results lend strong support to the hypothesis that household income has a positive causal effect on children’s outcomes, including their cognitive and social-behavioural development and their health, particularly in households with low income to begin with. There is also clear evidence of a positive causal effect of income on ‘intermediate outcomes’ that are important for children’s development, including maternal mental health, parenting and the home environment. The review also makes a methodological contribution, identifying that effects tend to be larger in experimental and quasi-experimental studies than in fixed effect approaches. This finding has implications for our ability to generalise from observational studies.