Poverty of children in Germany and its impact on children's health and educational outcomes [Elektronische Ressource] / vorgelegt von Marcus Tamm

Tamm

Sujets

• Social work

Informations

• Publié par: ruhr-universitat_bochum
• Publié le: 01 janvier 2007
• Nombre de lectures: 7
• Langue: English

Extrait

Poverty of Children in Germany and its Impact
on Children's Health and Educational
Outcomes



INAUGURALDISSERTATION
zur
Erlangung der Würde
eines Doktors der
Wirtschaftswissenschaft
der
Fakultät für Wirtschaftswissenschaft
der
Ruhr-Universität Bochum







vorgelegt von
Diplom-Volkswirt Marcus Tamm
aus Wolfach

2007





























Dekan: Prof. Dr. Bernhard Pellens
Referent: Prof. Dr. Christoph M. Schmidt, Ph.D.
Korreferent: Prof. Dr. Thomas K. Bauer
Tag der mündlichen Prüfung: 2. Mai 2007

ISBN 978-3-86788-007-7 Content

1 Introduction and Overview 1
1.1 General Motivation 1
1.2 Principles and Practices for Measuring Poverty 3
1.3 Some Comments on the Identification of Causal Effects 6
1.4 Data 10
1.5 Overview and Summary of Findings 13

2 A Portrait of Child Poverty in Germany 16
2.1 Introduction 17
2.2 Empirical Framework 19
2.3 A First Look at Child Poverty Rates 23
2.4 Alternative Measures of Child Poverty 28
2.5 Poverty Dynamics 33
2.6 Family Income, Taxes and Benefits 39
2.7 Conclusions 44

3 Always Poor or Never Poor and Nothing in Between? Duration of Child
Poverty in Germany 52
3.1 Introduction 53
3.2 Duration Model 56
3.3 Data and Model Specification 59
3.4 Empirical Results 63
3.4.1 Results for West Germany 1984-2004 64
3.4.2 Results for Reunified Germany 1992-2004 74
3.5 Conclusions 78

i i4 Child Health at Birth and its Association with Mother's Poverty Status during
Pregnancy – Empirical Findings for Germany 85
4.1 Introduction 86
4.2 Income Effects on Children's Health – The State of the Literature 88
4.3 Data 91
4.4 Results 94
4.5 Conclusions 107

5 Does Money Buy Higher Schooling? Evidence from Secondary School Track
Choice in Germany 111
5.1 Introduction 112
5.2 Institutional Background 115
5.3 Data and Methods 117
5.4 Results 120
5.5 Conclusions 128

References 135

Acknowledgements 143

Curriculum Vitae 144

ii iChapter 1

Introduction and Overview

1.1 General Motivation

Both demographic change and structural and technological progress require that advanced
economies display an increasingly productive future workforce, if they want to retain current
standards of living or even the current level of growth rates of aggregate output (see e.g.
BÖRSCH-SUPAN (2003) and LAGEMAN and SCHMIDT (2006)). This requires a high intensity of
human capital investments, which contribute to generate and maintain a high level of (labor)
productivity. Clearly, formal education is one of the major ingredients in any strategy for
achieving enhanced levels of productivity. Another important factor is the maintenance of
satisfactory levels of individual health. Against this background, there is a growing concern
about children growing up in disadvantaged environments, since these children often display
lower educational and health outcomes and these outcomes, in turn, are investments for and
determinants of children's future well-being and their level of productivity.

There is extensive empirical evidence from multiple disciplines on humans and animals that
early experience of disadvantaged environments affects various cognitive and non-cognitive
skills as well as other outcomes (e.g. KNUDSEN ET AL. (2006)). An unfavorable family
background is one important form of such a disadvantaged environment. Among these
outcomes, which have been shown to be malleable to interventions, are the biochemistry and
architecture of neural circuits, language acquisition, the formation of cognitive skills and
schooling outcomes like IQ, test scores and rates of grade repetition or graduation.
Furthermore, family background has been shown to influence the development of behavior,
1 for example social behavior like the probability of committing crimes or becoming
delinquent, or health related behavior like taking up smoking.

One typical example for a disadvantaged environment, which might impinge upon child
outcomes, is growing up in poverty, especially permanent poverty. HAVEMAN and WOLFE
(1995) and MAYER (2002) provide ample evidence, mainly from the US, that some child
outcomes are significantly affected by poverty, while this is less clear for others. This thesis
contributes to the literature by providing evidence on the impact of relative poverty on health
outcomes and on educational opportunities of children in Germany. Of course, within this
thesis we are forced to be highly selective, focusing only on very few outcomes and leaving
aside many others of equal importance.

The choice of outcomes is well founded. Health has always been regarded as one of the most
important sources of human well-being, not only because of its direct effects on happiness but
also because of indirect effects, e.g. the effect of health on peoples’ productivity and therefore
their capacity to generate income and wealth, or on the capacity to enjoy other sources of
well-being. Education is generally associated with better labor market outcomes like
employment probabilities and earnings prospects.

From a theoretical perspective these child outcomes might be seen as outcomes from a
production function (see BECKER and TOMES (1979, 1986)). Some of the inputs of these
production processes are subject to choices and investments of the parents. Within these
theoretical models, parents invest in children for two reasons: (i) parents expect to receive
some kind of pay-off from their children when they are old and thus will be better off if
children are highly productive and earn higher income, and (ii) for altruistic reasons, because
parents might feel better if their kids are better off. In these models, investment in children's
outcomes is optimal when the marginal rate of return to these outcomes equals the rate of
return to other household investments. In equilibrium, optimal investment in children's
outcomes is independent of parental income if parents have access to perfect capital markets.
If not, however, being poor might have a detrimental causal effect on investments and, thus,
on child outcomes.

When trying to uncover whether poverty has indeed an impact on child outcomes, we are
faced with one of the most challenging problems of any empirical analysis: The
2 counterfactual situation is unobservable. The counterfactual situation is implied by a
counterfactual question which can always be described by a What would have happened, if…?
question. This question is at the heart of every empirical analysis (FERTIG ET AL. (2007)). An
example of a counterfactual question in the context at hand is: What would have happened to
a child’s health outcome, e.g. measured by its satisfaction with health or by its propensity to
be born with low birth weight, if its family had not been poor? Obviously this situation is
unobservable since in reality the family has either been poor or not. One has to find and
impose suitable identifying assumptions, in order to answer the question. This is the major
contribution provided by this thesis.

The remainder of this introductory chapter is organized as follows. First, we present norms
and value judgments involved in measuring poverty and lay out the definition used throughout
this thesis. Then, we return to the problem on how to answer counterfactual questions in
Section 1.3. After presenting the data set (Section 1.4), which constitutes the basis for our
empirical analyses presented in the following chapters, we finally provide an overview on the
main findings of this thesis in Section 1.5.


1.2 Principles and Practices for Measuring Poverty

In this section we shortly discuss principles and practices for measuring poverty, with a
special focus on child poverty. The discussion largely follows CORAK (2005) and deals with
aspects involving (i) the range of resources that might be considered when dealing with
poverty, (ii) the distribution of resources within households, (iii) the consideration of
economies of scale of households, (iv) the determination of thresholds that divide the
population into those who are poor and those who are not poor and, finally, (v) rules for
counting the poor in order to provide aggregate measures of the incidence of poverty. Some of
these aspects are discussed in more detail in Chapter 2, where we explicitly focus on
disparities in child poverty rates that are due to differences in the definition of poverty.

In order to measure (child) poverty several choices and value judgments have to be made.
First and foremost one has to define the resources available to the population that are relevant
for securing a minimum standard of living. Several theoretical concepts have been developed
in order to define such a