Abstract
When parents are suspected of child abuse or neglect, their children may be placed with foster families. We estimate the relationship between the monthly subsidies paid to foster families and the quantity of foster care services provided. The empirical model uses variation in subsidies and foster care populations within 37 states and the years 1987–1995. One innovation in our approach is that we exploit the idea that states do not appear to set market clearing rates, as evidenced by a foster home shortage during this time period. In this case of excess demand, variation in the monthly subsidy traces out the supply curve. Our results show that states with high demand may be able to use economic incentives to recruit foster families.
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Notes
The wide variation in estimates for parental drug abuse for the foster care population is due to different definitions of drug abuse in the different studies included in the table.
As long as these differences are not correlated with the explanatory variables in the model, and, especially, the foster care subsidy rate, our estimates will be unbiased. In addition, the fixed-effects models control for attitudes that are constant in a state across time.
The response rates to this voluntary survey ranged from 14 states to 32 states over this period. Approximately 30 states responded between 1987 and 1990, dropping to 17 for 1991–1993, 20 for 1994 and 14 for 1995. The response rate dropped when new federal reporting requirements—the Adoption and Foster Care Analysis and Reporting System (AFCARS)—were scheduled to begin. Unfortunately, implementation of AFCARS was delayed. Results using these data are discussed below. In total, seven states have reported for all nine years, three for 8 years, four for 7 years, four for 6 years, one for 5 years, eight for 4 years, four for 3 years, and six for 2 years. Four states (including D.C.) reported for 1 year and are dropped for comparison with the state fixed effects models, though results are similar when they are included. Ten reported for none of the years.
To focus on foster parent supply, these data include only children in family foster care (including kinship care), not group homes, pre-adoptive homes, etc. Seventy-five percent of children in out-of-home-care were in family foster care in 1991. Special thanks to Pat Shapiro at the American Public Human Services Association (formerly the APWA) for providing the unpublished data.
The data appendix documents the source for each variable.
An alternative strategy would instrument for the foster care subsidy rate, potentially with risk factors that shift demand. Unfortunately, most exclusion restrictions are suspect, as conditions that increase the pool of parents suspected of child abuse or neglect tend to be conditions that lower the opportunity costs of providing foster care. This article instead relies on the disequilibrium in the market as described by the foster parent shortage during this time period. We address the issue of the possible exogeneity of the subsidy rate later in the article.
It might also be argued that the demand curve is upward sloping. If families willingly give children to the state, they may be more willing to do so if the subsidy to take care of the child is higher. This is especially important with kinship foster care, where the subsidy will go to a non-coresident family member. In order to take advantage of higher subsidies, though, a family will have to declare themselves unfit to parent and risk losing the child. The empirical work attempts to control for changes in the use of kinship foster care over this time period.
Doyle (2007) finds that reducing the subsidy to kinship providers in Illinois by 30% led to a 20% decrease in the likelihood of family members providing foster care services. In addition, child health, education, and placement outcomes do not appear to suffer following the decline in public resources. It appears that the quality of foster parents may increase with the fall in subsidies, as lower quality foster parents select out of the program.
There are fewer observations due to missing control variables. When a model that included the controls available for all 200 observations was considered, the result was similar with a critical point of $287. Further, the subsidy levels do not include other payments, such as clothing allowances. When an indicator for the state providing an additional clothing allowance was included, the estimates were nearly identical. This indicator will be absorbed in the state fixed effects models.
Results available from authors on request.
The model was estimated with 200 observations, and results are robust to the specification that is used to categorize the states. As in Table 3, single-parent families and unemployment show statistically, and economically, significant positive relationships with foster care placement, while the teen motherhood measure is negatively related to placement.
Similar analysis was conducted using the opportunity cost measures to determine predicted supply of care. The difficulty in dividing states into high supply versus low supply is that the opportunity cost measures can also be thought of as risk factors. States with low wages or low levels of educational attainment may lead to higher demand for foster care, as well as supply. The results mirrored the high-risk versus low-risk analysis, with “high supply” states having the quadratic relationship, while little relationship in the “low supply” states was found.
Paxson and Waldfogel (2003) also find that the fraction of children in extreme poverty is a better predictor of child maltreatment compared to the fraction of children in poverty. We find extreme poverty to better predict foster care placement. In addition, they find that the fraction of children with working single mothers predicts maltreatment, while we find that the fraction of children in all single parent families is a better predictor of foster care placement. Our analysis is done prior to 1996, which does not consider the changes in opportunity costs and risk factors due to welfare reform—the context of their paper. Further, AFDC rates were not included in the main regressions as the variation in subsidy rates partially stem from variation in AFDC rates, and this is the type of variation that we want to use to identify the supply response.
The average welfare payment in the sample was $319 with a standard deviation of $135. It is higher than the foster care rate due to the larger family size used to define the payment.
Similar results are found when the lead subsidy rate—the rate in the following year—is used as the dependant variable to test whether rates slowly respond. In the state fixed effects specification, unemployment is negatively related to the next year’s subsidy rate, while the nonwhite population is negatively related to the subsidy rate. The pattern of signs is similar to those presented in Table 5. Similar results are also found when considering coefficients in a single-equation context.
The expected response of states reacting to changes in female education or wages is ambiguous. In similar regressions, wages were generally found to be positively associated with the subsidy rate, though not statistically significant with state fixed effects. The fraction of women who are high school dropouts had a marginally significant negative relationship with subsidy rates.
Similar models were estimated using state fixed effects, and little relationship was found between subsidy rates and foster care placement. However, the identification would come from states changing subsidy rate categories over time and it appears that there is too little variation to provide meaningful estimates.
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Acknowledgements
The authors would like to thank Phil DeCicca, Steve Levitt, Dean Lillard, Alan Mathios, and Mark Testa for helpful comments and insights. All remaining errors are our own.
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Data appendix
Data appendix
1.1 Foster care data
VCIS foster care data: American Public Welfare Association (now, American Public Human Services Association (APHSA)). Unpublished data by placement type.
Adoption and Foster Care Analysis and Reporting System. National Data Archive on Child Abuse and Neglect. www.ndacan.cornell.edu
1.2 Subsidy rate data
American Public Welfare Association (now, American Public Human Services Association (APHSA)) “Foster Care Rates.” W-Memo. vol. 5 no. 6. June 1993. Also reported in:
Committee on Ways and Means, United States House of Representatives. “Overview of Entitlement Programs.” Green Book. Various years.
1.3 Child abuse rates
National Child Abuse and Neglect Data System reported by the Child Welfare League of America’s national data analysis system: ndas.cwla.org
1.4 Child poverty, teen motherhood, single-parent families
March CPS, Vital Statistics, and Census data reported in Annie E. Casey Foundation Kids Count 1999. http://www.aecf.org/kidscount/kc1999/rawdata.htm
1.5 Unemployment data
Bureau of Labor Statistics. “Unemployment Rate, Not Seasonally Adjusted.” http://stats.bls.gov/cgi-bin/surveymost. 1999
1.6 Metropolitan, crime, non-white data
U.S. Bureau of the Census. Statistical Abstract of the United States. Various years. Metropolitan population data was found from a linear interpolation for 1991, 1993, and 1995 though the percentages do not change very much. However, for 1992 and 1994, the number of metropolitan areas did change with corresponding increases in the metropolitan area population. The results are not sensitive to the inclusion of this variable however.
1.7 Arrest data
FBI. Uniform Crime Reports. Various Years.
1.8 Female education and wage data
March CPS Supplement 1987–1995.
1.9 Minimum wage data
U.S. Department of Labor, Employment Standards Administration. The Book of States: 1996–1997. Table 8.20.
1.10 Kinship foster care data
Kusserow, R.P. Using Relatives for Foster Care. Washington: Department of HHS, Office of the Inspector General. July 1992.
Kusserow, R.P. State Practices in Using Relatives for Foster Care. Washington: Department of HHS, Office of the Inspector General. July 1992.
Petit, M.R. and P. A. Curtis. 1997 CWLA Stat Book. Washington: Child Welfare League of America. 1997.
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Doyle, J.J., Peters, H.E. The market for foster care: an empirical study of the impact of foster care subsidies. Rev Econ Household 5, 329–351 (2007). https://doi.org/10.1007/s11150-007-9018-x
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DOI: https://doi.org/10.1007/s11150-007-9018-x