Neighborhood Poverty During Childhood and Fertility , Education , and Earnings Outcomes

Neighborhood Poverty During Childhood and Fertility, Education, and Earnings Outcomes Previous studies attempting to estimate the relative importance of family, neighborhood, residential stability, and homeownership status characteristics of childhood environments on young adult outcomes have: (1) treated these variables as though they were independent, and (2) were limited in their ability to control for household selection effects. Our study offers advances in both areas. First, it treats the key explanatory variables above as endogenously determined (sometimes simultaneously so). Second, to deal both with this endogeneity and the selection problem, we compute instrumental variable estimates for how childhood average values of neighborhood poverty rate relate to fertility, education, and labor market outcomes in later life. We analyze data from the U.S. Panel Study of Income Dynamics (PSID) that are matched with Census tract data, thereby permitting documentation of a wide range of family background and circumstantial characteristics. For children born between 1968 and 1974, we analyze data on their first 18 years and various outcomes in 1999 when they are between 25 and 31 years of age. We find that, all else equal, children raised in neighborhoods with higher average poverty rates have substantially: (1) greater chances of having a child before age 18; (2) lower chances of completing high school or college; and (3) lower annual earnings, both directly and through intermediate outcomes. Most estimates of neighborhood effects are larger when we employ the instrumental variables approach. Introduction and Context Much recent literature—emanating both from the United States and Europe—has focused our attention on the plight of children growing up in neighborhoods of concentrated socioeconomic disadvantage. From a policy perspective, it is critical for the guidance of urban revitalization initiatives and assisted housing programs designed to increase access to a wider range of locations to ascertain the degree to which neighborhood characteristics affect children’s developmental context (Galster 2002, 2005; Galster et al. 2003a). Our research is designed to advance understanding of the extent to which the success of children in young adult life (measured by a variety of indicators) is related to the characteristics of their neighborhoods while controlling for characteristics of their: families (education, income, attitudes, values, family structure), parents’ homeownership status, and residential mobility history. In this paper we focus on the relationship between one particular aspect of the child’s developmental environment, the cumulative neighborhood poverty rate experienced during the first 18 years of life, and three outcomes: teen fertility, educational attainment, and earnings. This establishes the focus for our literature review, theoretical development, and discussion of findings, with the other background characteristics of young adults essentially being treated here as control variables. The statistical literature seeking to identify the predictors of various social, economic, behavioral and psychological outcomes for children and adults is voluminous and has been subject to several recent comprehensive reviews (Robert 1999, Leventhal and Brooks-Gunn 2000, Earls and Carlson 2001, and Sampson, Morenoff and GannonRowley 2002; Ellen and Turner, 2003; Galster, 2005). Suffice it to note in summary that the bulk of this literature (e.g., Furstenberg et al., 1999, Brooks-Gunn et al., 1997) examines factors affecting outcomes measured during childhood, ranging from preschool to adolescence. However important such outcomes are, we believe it is also crucial to examine childhood factors that account for later success as adults. In this regard there is an established literature examining negative adult outcomes, such as welfare usage (e.g., Moffitt, 1992; Gottschalk, McLanahan, and Sandefur, 1994; Gottschalk, 1996; Vartanian, 1999; and Pepper, 2000) school dropouts (e.g., Clark, 1992; Mayer, 1997, Gleason and Vartanian, 1999; and Sawhill and Chadwick, 1999), crime (e.g., Sullivan, 1989; Freeman, 1991; Peeples and Loeber, 1994; Grogger, 1997), 1