Poverty, Pregnancy, and Birth Outcomes: A Study of the Earned Income Tax Credit

Beyond improvements to healthcare access and quality, economic interventions are increasingly recognized as a mechanism to address perinatal health outcomes.1 In the United States, the largest program for poverty alleviation is the earned income tax credit (EITC). The EITC involves a tax rebate to low-income families contingent upon their employment, with larger benefits for recipients with children. The size of the credit increases with increasing earned income, eventually plateauing followed by a phase-out of benefits (Supplemental Figure 1).2 Initiated in 1975, the program was expanded in 1993, creating substantial variation in the size of the tax credit awarded to recipients. Individual states also offered differing amounts of earned income tax credits that underwent expansions during the study period.3 The quasi-random nature of these variations – in that they are unassociated with individual characteristics – presents the opportunity to more clearly identify the impacts of the EITC on health. During 1986 to 2000, the period we examine in this study, the inflation-adjusted maximum benefit size for a family with two or more children increased four-fold (Figure 1). Studies have shown that the EITC has successfully brought millions of families out of poverty.4 Figure 1 Instrumental variables design While not specifically designed as a health-improving intervention, the impact of the EITC on child health outcomes has increasingly become a subject of research. This work has found that larger tax credits bring about improved child achievement scores, improvements in indices of child development, and improved subjective child health status.5–7 Prior studies of perinatal health outcomes in particular have found that larger EITC benefits are associated with increased birthweight, decreased prevalence of maternal smoking, and higher numbers of prenatal visits.8–10 The results, however, have not been uniformly positive, as higher payments have been associated with increased odds of very low birthweight among low-income black mothers.11 Studies of welfare reform have also shown that stringent work requirements can lead to decreased breast feeding,12 suggesting that poverty alleviation interventions contingent upon employment may bring about unintended consequences. Moreover, assessments of employment-dependent tax credits in other high-income countries have failed to show improvements in recipients’ self-reported health status.13 There are multiple pathways through which maternal socioeconomic disadvantage during pregnancy could impact perinatal health. Women with lower household income suffer from higher rates of malnutrition,14 exhibit disproportionately high rates of risky health behaviors such as smoking and alcohol use,15, 16 and demonstrate heightened psychological stress associated with neuroendocrine dysfunction.17 They are also less likely to have access to adequate prenatal care services, and less likely to breastfeed their children.18, 19 Mediated by these pathways, poverty during pregnancy has been found to have long-lasting effects on child health and cognitive development.20 Almost without exception, however, studies linking poverty and perinatal health are correlational in nature, unable to establish whether the observed relationship is biased by unobserved confounding factors. This study contributes to the literature on the health effects of poverty alleviation programs by exploiting variation in the size of EITC payments during 1986–2000 to examine the effects on a wide array of perinatal health outcomes. We hypothesize that larger payments are associated with improved health, taking advantage of the rich set of covariates in our dataset to control for potential confounders. Given the likelihood of residual confounding by unobserved factors, however, we also use quasi-experimental methodologies to address this potential source of bias. We employ instrumental variables (IV) analysis, a technique that relies on the existence of a quasi-randomly assigned variable (the instrument, Z), which impacts the outcome (Y) only through the exposure (X) (Figure 1). IV analyses address issues of confounding by unobserved characteristics that impact both the outcome and the exposure. This study thus adds to the literature clarifying the links between maternal socioeconomic status and perinatal health.