Chapter Title: Parental Income Shocks and Outcomes of Disadvantaged Youth in the United States

Government policies that increase the incomes of poor families have been promoted as a way of improving children’s life chances on the grounds that children who grow up in rich families tend to have better socioeconomic outcomes as adults than children who grow up in poor families. Yet the process that generates the relationship between parents ’ incomes and those of their children, though well documented, is not well understood. One possibility is that differences in family income lead to differences in parents’ monetary investments in their children. Another is that differences in family income refl ect differences in parents ’ innate characteristics that are passed on to their children. Understanding which factors contribute to the intergenerational trans-mission of socioeconomic status is crucial to the development of public policies that improve youths ’ outcomes. If, for example, disadvantaged chil-dren have poor outcomes because their parents have less money, then the effects of public policies on family income should be a central consideratio