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Population Studied: Data on the children of the NLSY 1979 female respondents will be used. Eleven waves of data have been collected on over 11,000 children. The study population will include over 9,000 children with outcome data in at least one time period between 1988-2006.

Principal Findings: Twelve percent of the children in the sample had an activity limitation reported at some point during the study period. In cross-sectional models controlling for child, mother, and other household characteristics, a $10,000 increase in family income was associated with a -.36% decrease in the probability of parents reporting a activity limitation. After controlling for child fixed effect, the association decreases and becomes statistically insignificant. Using expansion in the EITC to create an instrumental variable for reported income reveals a positive causal effect of income on the probability of reporting any activity limitation. Specifically, a $10,000 increase in family income implies a .8 percent increase in the likelihood of reporting a activity limitation.

Conclusions: Family income is a causal determinant of the way in which parents perceive the limiting effect of their children's chronic conditions.

Implications for Policy, Delivery or Practice: There may be a disparity in the availability and affordability of services to support children with chronic health conditions in families with high income versus low income. There needs to be further description of this causal relationship to understand the source of this disparity.

Methods: We employ a fixed-effects instrumental variable design first used by Dahl and Lochner (2005). The approach controls for permanent unobserved heterogeneity via child-level fixed effects and transitory unobserved characteristics with an instrumental variable. Specifically, we use predicted after-tax/transfer family income as an instrument for current family income taking advantage of variation introduced by changes in the Earned Income Tax Credit (EITC).

We apply this strategy to the data on the children of the National Longitudinal Survey of Youth (NLSY) 1979. The sample includes up to 11 interviews with all children born to women in the original NLSY 79 sample. This sample was representative of U.S. children ages 14-22 in 1979. The current analysis includes over 9,000 children with at least one measurement of height and weight over the age of 2. Over 50% of the children in the sample had 4 or more observations.

Results: Overall, the prevalence of obesity in this sample increased from approximately 9% in 1986 to over 20% in 2006. The instrument for pre-tax/transfer income is constructed by predicting income based on a set of exogenous mother characteristics including age, race, education at age 23, AFQT score, and characteristics of the mother's home life at age 14. The taxes and transfers associated with this income are found using the TAXSIM software program available on-line at the National Bureau for Economic Research. The sum of the two values is equal to the predicted after-tax/transfer income. This variable serves as the instrument. The t-statistic on predicted after-tax/transfer income is highly significant in a regression on actual after-tax/transfer income after accounting for fixed effects.

In the child-fixed effects regressions, there is no relationship between changes in pre-tax/transfer income and childhood obesity. With the instrumental variable, however, an increase in current income is shown to reduce the probability of obesity. Specifically, in linear probability models an increase of $1,000 implies a 1% reduction in the prevalence of obesity.

Conclusions: The preliminary evidence from this analysis shows that family income does have a causal effect on childhood obesity. The observed relationship of decreasing prevalence of obesity with increased family income withstands rigorous controls for time-constant and time-varying unobserved characteristics. The preliminary evidence supports the expectation of positive public health effects from policies such as the EITC.

Methods: The instrumental variable approach leverages two sources of exogenous variation in family income to identify a causal effect: changing returns to maternal education at baseline and expansion of the Earned Income Tax Credit. Both sources of variation are shown to have a significant effect on changes in family income and are assumed to be independent of childhood obesity. The fixed effects instrumental variable design is applied to data on the children of the National Longitudinal Survey of Youth 1979. Wald and two-stage least squares estimates are used relate family income to childhood obesity.

Results: This study finds that a $10,000 increase in family income implies a 4.5% decrease in the probability of being obese (≥95th body mass index percentile). Relative to the national childhood obesity prevalence of 17%, the results imply that income transfers could have a substantial effect on the prevalence of obesity in the United States.

Conclusions and Implications: The results of this analysis provide evidence of the protective effect of increased income. Although the research design used in this analysis improves upon existing estimates of the ef fect of family income, the assumptions upon which the causal effect is identified mean the results may not generalize to all policies that affect income including increasing minimum wages or non-labor market based cash-assistance programs (i.e. TANF, SSI).