During one of our recent events, Sheldon Garon of Princeton University and Ray Boshara of the Federal Reserve Bank of St. Louis referred to the weak household balance sheet as one of the core economic challenges of our time, suggesting that households must focus on asset-building rather than rely on credit and debt. Asset-building has received a good deal of attention in recent years, due in part from emerging research that tests hypotheses about "asset effects"—that is, how household wellbeing might be improved by accumulating assets rather than debt. You are probably familiar with these hypothesized asset effects. Owning and accumulating assets such as savings, net worth, stocks/bonds, etc. appears to have positive effects on a variety of educational, economic, and health outcomes. In other words, asset-building appears to have effects beyond household balance sheets. One question of interest is whether improving household assets has positive effects on educational and health outcomes for children, including those with disabilities. A recent dissertation study by Jin Huang, Asset Effects for Children with Disabilities: Analysis of Educational and Health Outcomes, tests whether household assets lead to improved educational and health outcomes for children with disabilities. The results of key findings from this study are summarized below.
This study used data from 732 children (average age of 12) available from the Panel Study of Income Dynamics, a longitudinal dataset from the University of Michigan. Conditions used to define disability included epilepsy, speech impairment, hearing difficulty, difficulty seeing, retardation, emotional disturbance, orthopedic impairment, developmental delay, learning disability, autism, and hyperactivity. Children who reported at least one of these conditions were included in the sample. Several asset measures were used, including net worth (total assets minus debts) and liquid assets (assets easily turned into cash, like money held in savings accounts), to predict children's educational and health outcomes:
- Educational outcomes included reading and math scores, whether or not children repeated a grade in school, and whether or not they were suspended or expelled from school.
- Health outcomes included a global health rating, number of hospitalizations, the number of school days missed due to illness, number of doctor visits for illness, and whether or not children had doctor visits for emotional problems.
Huang used several advanced analytic techniques to produce results (e.g., regressions with assets measured before birth, propensity score classification, fixed effects models, dynamic fixed effects with structural equation models), the details of which are not discussed here.
What the Researcher Found
There is a plethora of interesting findings from this dissertation study, too numerous to discuss here. However, here are some of the key findings:
- Household assets were significantly related to educational outcomes:
- Children whose households had greater net worth and liquid assets scored significantly higher on reading and math scores, and repeated grades and were suspended/expelled less often.
- Household assets were significantly related to health outcomes:
- Children whose households had greater net worth and liquid assets scored significantly higher on a global health rating, had fewer hospitalizations, missed fewer school days due to illness, had fewer doctor visits for illness, and had fewer doctor visits for emotional problems.
- In both cases, asset effects were evident more frequently when households had net worth greater than $40,000 and liquid assets greater than $10,000.
What Does this Mean?
Results from this study have two broad implications for asset-building, keeping in mind the educational and health outcomes for children with disabilities. First, asset-building may be a strategy for improving the wellbeing of children with disabilities, the benefits of which may go beyond the household balance sheet. Second, asset-building should begin early in children's lives and focus specifically on health and health-related services. Perhaps Huang summarizes these findings best, stating "asset building should be included in the new vision for successful development of children with disabilities." In this way, asset-building may not only strenthen household balance sheets, but have long-term effects on children's wellbeing.
Things to Keep in Mind
Using the term "asset effects" suggests a causal relationship between household assets and children's educational and health outcomes, meaning that assets cause children to experience improved outcomes. This can be somewhat misleading, as it is challenging to examine causality within these relationships. Randomized controlled trials (RCTs) are often considered the gold standard in research because they allow researchers to get closer to the question of causality; however this study was not an RCT. While this study used advanced analytic techniques with a reputable, longitudinal dataset, we should be cautious about inferring causal relationships between household assets and children's outcomes.